Food grains were taxed in India under VAT even before the implementation of GST - FACTLY
Sai Krishna Muthyanolla
July 27, 2022
In the context of revised GST rates on certain food items, an Instagram post is being shared widely claiming that food grains and flour have been taxed for the first time in Independent India. Let’s fact-check the claim made in the post.
Claim: This is the first-time since the Independence that food grains (cereals), flour have been taxed in India.
Fact: Various states have been collecting VAT on food grains and flour since 2003. In July 2017, GST replaced VAT. Since then, only branded food grains and flour were charged a GST of 5%. However, according to GST council recommendations, from 18 July 2022, all pre-packaged and labelled food grains and flours will attract a GST of 5% if the quantity of package is less than or equal to 25kg or 25 litre. Hence the claim made in the post is FALSE.
We searched online for various taxes on food grains in the pre-GST regime, and found that various states were collecting VAT (Value Added Tax) on food grains like rice/paddy, wheat, maize etc and flour since 2005.
VAT was introduced into Indian taxation system on 01 April 2005. Every state has its own VAT Act. For example, Andhra Pradesh VAT Act, 2005 can be seen here. Since VAT is in state list, it may vary from one state to another.
Below is the list of some states which levied VAT on Rice/Paddy:
Similarly, the VAT on wheat, maize, flour and other food items of these states can be seen here.
However, Goods and service taxes (GST), implemented on 01 July 2017, replaced all the existing Central and State indirect taxes such as VAT, excise duty and service tax. The GST council, in its 47 meeting, recommended to bring pre-packaged and labelled food items like grains, curd, Lassi, Butter Milk etc. under the purview of GST.
The revised GST rates (updated on 18 July 2022) for the food grains and flour are as follows:
Moreover, the Ministry of Finance clarified that,” A single package of these items [cereals, pulses, flour etc.] containing a quantity of more than 25 Kg/25 litre would not fall in the category of pre-packaged and labelled commodity for the purposes of GST and would therefore not attract GST . However, if for any reason, retailer supplies the item in loose quantity from such package, such supply by retailer is not a supply of packaged commodity for the purpose of GST levy”
To sum it up, this is not the first-time food grains and flour are taxed in India.