What Is the Current GST Rate?
The Goods and Services Tax (GST) is a tax levied on traded goods and services in India. The GST was implemented on July 1, 2017, with the goal of creating a unified tax system across the country. Rice, wheat, barley, and other cereals are subject to a 12% GST.
What Does the HSN Code Mean?
The HSN code is a one-of-a-kind series of numeric codes assigned by the Indian government to a product. It is used for taxation and trading purposes, and it uniquely identifies a product in the country. Every product and cereal, for example, has an HSN code; wheat has an HSN code.
GST on foods & Grains
Certain types of food and grains will be subject to a 5% Goods and Services Tax beginning July 18, 2022. (GST).
Edible food grains are edible seeds, such as wheat, meslin, rye, barley, oats, rice, maize, sorghum grain, and other cereals, that are harvested and dried before being stored. They are widely consumed in India, primarily as flour, which is used to make baked goods such as bread. Section 2 of Chapter 10 of the GST Act, 2017, lists the GST provisions that apply to edible grains, as well as the HSN codes for edible grains.
Cereals GST Rate in India
Packaged food grains weighing more than 25 kg are subject to a 5% GST on their supply. Unpackaged food grains, on the other hand, are not subject to GST. Similarly, there is no GST on cereals packaged in unit containers weighing less than 25 kg.
Cereals are subject to a 0% GST rate.
If edible food grains are sold loose and not packaged in unit containers under a registered brand name, the GST rate is nil. This means that food grains are exempt from GST in this situation. Furthermore, if the food grains are packaged but weigh less than 25 kg, no GST is levied.
Cereals are subject to a 5% GST rate.
If food grains are supplied in a container and then segregated into different units, the GST rate is 5%. To be subject to GST, such a container or package must contain more than 25 kg of food grain.
Furthermore, the package must be associated with a registered brand name or a brand name that comes with an actionable claim or an enforceable right in a court of law. A 5% GST is levied on such supplies.
For example, if a supplier sells loose food grains worth Rs. 10,000 to a retailer, there is no GST on the transaction. However, if the grains are supplied in unit containers weighing more than 25 kg and labelled with a brand name, the applicable GST will be calculated as follows: Rs. 10,000 * 5% = Rs. 500
The Effect of GST on Edible Food Grains
The implementation of GST on food grains had the following consequences:
● The tax on the purchase of food grains has been drastically reduced. This is because all previous indirect taxes have been consolidated into a single one.
● The disparities in tax incidence between food-producing and non-food-producing states have narrowed.
● As a national tax is imposed, more private traders and producers are finding it easier to do business across the country.
● Traders are not required to base their purchasing decisions on different tax rates in different states. It has also become easier for traders to do business with traders in states where grains are plentiful.
● Other fees, such as market and rural development fees, have been reduced from what they were before the GST.
● The 5% GST levy on packaged food items has increased their price. Prior to the announcement of a 5% tax on packaged food grains, they were exempt from GST.
● Because food grains are a basic necessity for all consumers, price increases have impacted household monthly budgets.
Conclusion
Branded cereals sold in unit containers weighing more than 25 kg are subject to GST. In such cases, the GST rate on food grains is 5%. If food grains are sold loose, however, a nil rate of GST (i.e. no GST) is levied. The provisions for this are included in Chapter 10 of the GST Act, as are the HSN codes for food grains.