GST on Packaged Food: FM Sitharaman regarding tax on curd and flour, explained why GST was imposed

Non-Bharatiya Janata Party (BJP) ruled states of Punjab, Chhattisgarh, Rajasthan, Tamil Nadu, West Bengal, Andhra Pradesh, Telangana and Kerala have agreed to levy 5% GST.


New Delhi: Union Finance Minister Nirmala Sitharaman on Tuesday said that five per cent Goods and Services Tax (GST) has been levied on other items including flour after getting approval from all states including non-BJP ruled states.


Sitharaman's statement came amid criticism over imposition of five per cent GST on daily use products like milk, curd and flour. He said that the non-Bharatiya Janata Party (BJP)-ruled states of Punjab, Chhattisgarh, Rajasthan, Tamil Nadu, West Bengal, Andhra Pradesh, Telangana and Kerala had agreed to levy five per cent GST.

Sitharaman wrote on Twitter that before the GST regime, states used to levy sales tax or VAT on food grains. The purpose of levying GST on cereals, flour, curd and lassi is to check tax evasion. He said that this decision has been taken by consensus in the meeting of the GST Council. All the states were involved in this meeting.


This statement from the Union Finance Minister has come in the midst of no business in the first two days of the monsoon session of Parliament. Opposition parties are strongly protesting in Parliament on other issues including the imposition of GST on everyday use products. Sitharaman said, "Is this the first time that such food items have been taxed? No. Before the GST regime, states were collecting significant revenue from food grains. Punjab alone raised over Rs 2,000 crore through procurement tax on foodgrains and Uttar Pradesh Rs 700 crore.


He also cited VAT on rice imposed before 2017 in Punjab, Telangana, Uttar Pradesh, Andhra Pradesh, Kerala and Bihar to substantiate his point. In her tweet, however, Sitharaman has not given an example of taxation of pulses, paneer and lassi in the past, which will now attract GST.


The Union Minister said, “The GST Council in its recent 47th meeting had recommended a reconsideration of the imposition of GST on specific food items like pulses, cereals, flour, etc. A lot of misconceptions have been spread about this.” With the introduction of GST in July 2017, there was a five per cent tax on branded cereals, pulses and flour. GST consists of 17 central and state taxes including central excise duty and state VAT.


"Later, changes were made to levy tax on only those goods which are registered brand or goods sold under the brand. However, soon this provision was found to be misused on a large scale by reputed manufacturers and brand owners and the GST revenue on these items gradually declined significantly.


Sitharaman said the suppliers and the industry had urged the government to levy uniform GST on packing goods, to prevent such misuse. He said the matter was referred to the 'fitment committee' and after reviewing these issues in several meetings, recommendations were made on the modalities to prevent misuse. According to Sitharaman, the recommendations of the committee were reviewed by a Group of Ministers (GoM) made up of members from West Bengal, Rajasthan, Kerala, and Uttar Pradesh, Goa and Bihar and chaired by the Chief Minister of Karnataka.


He said, “The decision in this regard was taken in the 47th meeting of GST, which is valid from July 18, 2022. Changes were made in the modalities of levying GST on only these items and there has been no change in the scope of GST except for two-three items. Items like wheat and flour, etc., were earlier attracting 5% GST if they were branded and packed in containers. GST will be levied on these items packaged and labelled with effect from July 18, 2022.


The Finance Minister said, "It was a unanimous decision taken by the GST Council. All the states were present in the GST Council when this issue was raised by the Group of Ministers on rationalization of rates in the 47th meeting held in Chandigarh on June 28, 2022.