What is the rate of GST on Rice in India?

Rice is a staple food in India. It helps in the agricultural and trade economy. However, the GST on rice has become an important area of interest for consumers and businesses. Every farmer, miller, trader, and consumer should understand the GST rate on rice to manage pricing and compliance. As per the GST regime, the branded and pre-packaged rice will attract a certain tax rate. In contrast, unbranded and loosely sold rice is GST exempt. In this blog, you will get valuable guidance about GST on rice and more. 

What is GST on Rice?

The GST on rice was previously. It is because there was no GST on branded or unbranded specific goods. So, the Goods and Services Tax (GST) rate on rice, such as basmati, non-basmati, and other varieties, will attract 0% GST rate. The HSN (Harmonized System of Nomenclature) for rice is 1006 for all types of rice. The date is effective from 18th July, 2022, the exemption regarding the specified branded commodities was eliminated. Recently, the GST is leviable on pre-packaged and labelled commodities will attract 5% GST rate. However, we can say that the GST on rice will be applicable at a 0% or 5% rate that depending on how it is packaged or sold. 

Taxation of rice, wheat, cereals and flours under GST

In India, the GST on cereal category’s goods has been classified under Chapter 10 of the HSN code. Listed below are the items in Chapter 10 of the HSN Code:

• Rye
• Barley
• Oats
• Wheat and meslin
• Maize (Corn)
• Rice
• Grain sorghum
• Buckwheat, millet and canary seeds
• Other cereals

The above-mentioned goods are considered as Tax-exempt goods. In the case of the products packaged and sold under a registered brand name, the tax exempt product will lose its tax-exempt status. These goods will attract to a 5% GST tax rate if they are “prepackaged and labelled” under Section 2(l) of the Legal Metrology Act and its Rules.

According to the law, a “pre-packaged commodity” has the following key characteristics:

1. There is no purchaser is present or not pre-ordered
2. The item will be packed with or without a seal
3. It depends on the recommended standard packages of exact weight or measures quantity as per the Legal Metrology Act. The predetermined quantities mean the packets which are available with 100 grams. 200 grams, 500 grams, 1Kg, 2 Kg or 5Kg and multiples of 5kg. 

For example, a package of rice which contains 50 kg will not be considered labelled and a pre-packaged commodity for levying Goods and Services Tax (GST). If a person fails to make the required declarations on pre-packaged rice as per the Legal Metrology Act, 2009, then its rules will be a serious offence.

HSN code and GST rate on rice, wheat, cereals and other essential commodities

Here is the table outlining the HSN (Harmonized System of Nomenclature) code and GST rate on rice, wheat, cereals and other essential commodities:

How GST Affects Rice Prices and Market Dynamics?

The introduction of GST affects the price of rice by implementing a 5% tax on branded rice. This increases the prices of about Rs. 3 to Rs. 5 per kilogram. This streamlined structure of taxation has reduced the cost of production and distribution for businesses. Large brands find it difficult to pass these costs on to consumers in the market without losing the share of market. In contrast, smaller producers can keep prices more competitive due to the exemption on unbranded rice. This can lead to consumer preference for unbranded products that alter the competitive dynamics in the rice industry.

What is the Impact of GST on Rice Traders and Suppliers?

GST on rice has brought both challenges and benefits to rice traders and suppliers. Traders need to adjust their entire business processes to comply with the new GST regime due to tax compliance has become simpler for businesses. It has been a challenge for small traders to be competitive against big players in the post-GST market.

Effects of GST on Consumers and Household Budgets

The implementation of GST on rice has had a direct consequence on the affordability of rice for households. It is due to the elimination of interstate taxes such as Octroi. It reduced the cost of transportation and added to decrease retail prices for consumers. This had a positive impact on the household budget, which made rice more available to the common man.

Conclusion

Therefore, it is important to know the GST on rice for all stakeholders. It helps to make smooth trade operations and transparent pricing across the supply chain. In GST, a clear distinction between exemptions, branding, and packaging of rice will confirm that businesses follow the tax compliance while optimising their costs. Each farmer, trader, or consumer must stay updated on GST guidelines about rice to make better decisions for a better rice market in India.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.

FAQ

Q1. What is the GST on rice in India?

The GST on rice indicates that there is 0% GST for unpacked and unbranded rice. It is considered a GST-exempt. In contrast, a branded and pre-packaged rice attracts a 5% GST rate.

Q2. Why is there a GST rate on rice in India?

There is a GST on rice in India because it depends on its packaging and branding. A 5% GST rate will be applied to some rice, wheat, and other edible commodities according to the decision of the Indian Government. Recently, non-branded items will be charged 5% of GST rate if they are packaged and labelled.

Q3. Is basmati rice exempt from GST?

Basmati rice will be exempt from GST only if it is sold loose and unbranded. Otherwise, in case of pre-packaged and labelled, it will attract a 5% GST rate.

Q4. Is GST applicable to all kinds of rice?

No, the GST is not applicable to all kinds of rice. It is because it depends on how it is packaged and sold, but not the kind or variety of rice.

Q5. What is the difference in GST rates for raw and parboiled rice?

There is no difference in GST rates for raw and parboiled rice which depends on the type of processing.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.