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From 18 July 2022, certain kinds of food items and grains became subject to a 5% Goods and Services Tax (GST).

 

The term ‘edible food grains’ refers to edible seeds, particularly wheat, meslin, rye, barley, oats, rice, maize, sorghum grain, and other cereals, that are harvested and dried before finally being stored. They are widely consumed in India, mainly in the form of flour, which is used to make baked goods like bread. 

 

The GST provisions applicable to edible grains, and the HSN codes of edible grains, are listed in section 2 of Chapter 10 of the GST Act, 2017. 

GST Rate for Cereals in India

Packaged food grains in the form of packages that weigh over 25 kg attract a GST of 5% on their supply. On the other hand, unpackaged food grains are not taxable under GST. Similarly, GST on cereals that are packaged into unit containers under 25 kg is also nil. 

1. Cereals Taxed at Nil GST Rate

If edible food grains are not packaged as unit containers under a registered brand name, and are sold loose, the GST rate on such supply is nil. This implies that under such a situation, food grains are exempt from GST

 

Moreover, if the food grains are packaged, but are under 25 kg, no GST is levied. 

2. Cereals Taxed at 5% GST Rate

GST on food grains is 5%, if they are supplied by being put into a container and then segregated into different units. Such a container or package should contain more than 25 kg of the food grain to come under the purview of GST. 

 

Moreover, the package must have a registered brand name attached to it, or a brand name that comes with an actionable claim or an enforceable right in a court of law. For such supplies, 5% GST is charged. 

 

For example, if a supplier sells loose food grains worth Rs. 10,000 to a retailer, no GST is applicable on the trade. However, if the grains are supplied in unit containers of over 25 kg that are labelled with a brand name, the GST applicable will be calculated as:

Rs. 10,000 * 5% = Rs. 500

 

Let us now take a look at the provisions for different food grains, their HSN codes, and the GST rates applicable to them. 

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HSN Code & GST Rate for Cereals

‘HSN’ stands for ‘Harmonised system of nomenclature’. The HSN code is a 6-digit code that is used all over the world, and is also used in India to classify different types of goods with respect to GST. Chapter 10 of the GST Act indicates the HSN codes of food grains and the rates of GST on cereals: 

HSN Code

Name and type of the cereal

GST rate

1001

Meslin and wheat, unpackaged 

Nil 

1001

Meslin and wheat, in a unit container marked with a registered brand name, or a brand name that has an enforceable right in the court. 

5%

1002

Rye, unpackaged 

Nil

1002

Rye, in a unit container marked with a registered brand name, or a brand name that has an enforceable right in the court. 

5%

1003

Barley, unpackaged 

Nil

1003

Barley, in a unit container marked with a registered brand name, or a brand name that has an enforceable right in the court.

5%

1004

Oats, unpackaged 

Nil

1004

Oats, in a unit container marked with a registered brand name, or a brand name that has an enforceable right in the court.

5%

1005

Maize, unpackaged 

Nil

1005

Maize, in a unit container marked with a registered brand name, or a brand name that has an enforceable right in the court.

5%

1006

Rice, unpackaged 

Nil

1006

Rice, in a unit container marked with a registered brand name, or a brand name that has an enforceable right in the court.

5%

1007

Grain sorghum, unpackaged 

Nil

1007

Grain sorghum, in a unit container marked with a registered brand name, or a brand name that has an enforceable right in the court.

5%

1008

Buckwheat, millet, canary seed, jawar, bajra, ragi, and other cereals, unpackaged 

Nil

1008

Buckwheat, millet, canary seed, jawar, bajra, ragi, and other cereals, in a unit container marked with a registered brand name, or a brand name that has an enforceable right in the court.

5%

Impact of GST on Edible Food Grains

The introduction of GST on food grains has had the following impact:

  • The tax on the purchase of food grains has reduced significantly. This is because all other indirect taxes that were previously levied have been consolidated into one. 

  • The tax incidence disparities between food-producing states and non-food-producing states have narrowed down. 

  • More private traders and producers are finding it easier to do business across the country, as a common tax throughout the nation is levied. 

  • Traders don’t have to make their buying decisions based on different tax rates in different states. It has also become easier for traders to get into business with traders in states where there is a surplus of grains.

  • Other charges such as market and rural development fees have reduced from what used to be charged in the pre-GST era.

  • The cost of packaged food items has increased due to the 5% GST levy on them. Before the announcement of charging a 5% tax on packaged food grains, they did not come under GST

  • Since food grains are a basic necessity for all consumers, a hike in price has adversely affected the monthly budgets of households. 

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Conclusion

Branded cereals that are sold in unit containers of over 25 kg come under the purview of GST. In such cases, GST on food grains is charged at 5%. However, if food grains are sold loose, GST at a nil rate (i.e. no GST) is levied. The provisions for the same are mentioned in Chapter 10 of the GST Act, along with the HSN codes of the food grains.

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