TN traders’ solution to avoid GST on 25 kgs of rice: Sell it in 26 kg sacks

With 5% GST levied on pre-packed, labelled items sold in retail, 25 kg rice bags are more expensive by Rs 50-80 now. But traders in Tamil nadu have found a loophole.
Rice sacks kept in a shop
Rice sacks kept in a shop
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In order to circumvent the 5% Goods and Services Tax (GST) on rice, a group of rice vendors in Tamil Nadu have come up with a simple solution — selling rice in 26 kg bags instead of the usual 25 kg. The government considers rice bags weighing under 25 kg as retail, and each kg of this rice now costs Rs 2-3 more than it used to. As a result, consumers have to shell out Rs 50-80 extra for one 25 kg bag of rice. However, traders have found a way to avoid the charges by selling rice in quantities of 26 kg, rather than 25 kg.

The 5% GST hike is applicable to even unbranded commodities if they are pre-packaged and labelled and is levied on all rice bags under 25 kg (which is considered retail). However, now that the rice is packed in 26 kg bags, the rice becomes wholesale, which considerably eases the burden on consumers. However, this would not help those consumers who cannot afford to buy such large quantities of rice at a time, and for this reason, the traders have demanded the government to roll back the hike in GST rates.

The traders have said that each kilo of rice sold in retail now costs Rs 2-3 higher than it used to earlier. As a result of this, 25 kg bags can cost Rs 50-80 more than it did before, heavily impacting consumers.

Since July 18, the GST council’s decision of 5% tax on pre-packed, labelled food items like atta, paneer and curd came into force. After the 47th GST Council meeting chaired by Union Finance Minister Nirmala Sitharaman was held with her state counterparts, an exemption list and list of imposed tax on a host of goods and services was released.

Finance Minister Nirmala Sitharaman has defended the imposition of 5% tax on certain food items, saying that it was a unanimous decision taken in a meeting with states. She also said that the levying of tax on food items was practised even before GST came into force. "It has been prescribed that GST on these goods shall apply when supplied in 'pre-packaged and labelled' commodities attracting the provisions of Legal Metrology Act. For example, items like pulses, cereals like rice, wheat, and flour, etc, earlier attracted GST @ 5% when branded and packed in a unit container. From 18.7.2022, these items would attract GST when 'pre-packaged and labelled'," she had tweeted.

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