A decision to levy Goods and Services Tax on packaged and labelled food items was taken unanimously by the GST Council, Union Finance Minister Nirmala Sitharaman claimed on Tuesday.
All states, including those not ruled by the Bharatiya Janata Party, had agreed with the decision, she added.
Sitharaman made the statement a day after Opposition leaders criticised the Centre for hiked GST rates on food, hospital and hotels.
The minister said that when the GST regime was rolled out, a tax rate of 5% was levied on branded cereals, pulses and flour. Later, the provision was amended so that such items would attract GST only if they were sold under a registered brand name, she said.
“However, soon rampant misuse of this provision was observed by reputed manufacturers and brand owners, and gradually GST revenue from these items fell significantly,” Sitharaman said.
Thus, the council decided to apply GST to these items when they are pre-packaged and labelled and come under the purview of the Legal Metrology Act, the finance minister added.
“For example, items like pulses, cereals like rice, wheat, and flour, etc, earlier attracted GST @ 5% when branded and packed in unit container,” she said. “From 18.7.2022, these items would attract GST when pre-packaged and labelled.”
Sitharaman also released a list of items that will not attract GST when sold loose. These are pulses/dal, wheat, rye, oats, maize, rice, flour, suji/rawa, besan, puffed rice and curd/lassi.
“This decision was a much-needed one to curb tax leakage,” the finance minister said. “It was considered at various levels including by officers, the Group of Ministers, and was finally recommended by the GST Council with the complete consensus of all members.”
While Sitharaman claimed that the non-BJP government had also agreed with the decision to impose GST on pre-packed and labelled food items, Kerala Finance Minister KN Balagopal claimed that the state government had opposed the proposal in meetings of the GST Council, The Hindu reported.
He said that the Kerala government had demanded that luxury goods should be brought back under the highest GST slab rate of 28%. The tax rate on such items had been reduced to 18% and 12% before Assembly elections.
On Monday, Congress leader Rahul Gandhi said that the revised rates were the BJP’s masterclass on “how to destroy one of the world’s fastest-growing economies”.
The Congress had said that the government has increased GST on food despite India’s low ranking on the Global Hunger Index.