The Haryana Authority of Advance Ruling (AAR) in the case of M/s DD International vide Advance Ruling No. HR/HAAR/34/2022-23 dated 09.02.2023, has held that 5% GST is applicable on supplies of prepackaged and labeled rice up to 25 kg to the factory of the exporter.

In this case, the applicant is in the business of manufacturing and supplying rice and supplies rice to customers in pre-packaged and labelled packages with a quantity up to 25 kilograms. The Applicant submitted that they have 3 types of Customers sales/supplies are executed (i) Customers located abroad , (ii) Customers located in India who purchase rice from us for the purpose of exports on “bill to ship to” basis (“Exporter”), iii) Customers located in India who purchase rice from us for the purpose of exports (“Exporter”).

The applicant sought an advance ruling on whether GST would be leviable on the export of pre-packaged and labelled rice up to 25 kg to foreign buyers. Also, whether GST would be applicable on the supply of pre-packaged and labelled rice up to 25 kg to an exporter on a ‘bill to ship to’ basis, i.e., a bill to the exporter and ship to the customs port. The exporter ultimately exports the rice to a foreign buyer.

The AAR observed that as per Notification No. 06/2022-Central Tax (Rate) dated July 13, 2022, 5% GST is applicable on the supply of pre-packaged and labelled rice up to 25kg if two conditions are satisfied. Firstly, it is pre-packaged and labelled. Secondly, it is required to bear the declarations under the provisions of the Legal Metrology Act, 2009. Further, the AAR observed that the legislature's intention is that the supply of rice in packets of up to 25 kg, which are duly pre-packaged and labelled as per the Legal Metrology Act, 2009, and the rules made thereunder, is a taxable event and it’s not an exempted or nil-rated supply.

The AAR held that if supplied goods are prepackaged, labelled, and in packages of less than or equal to 25 kg in quantity, then they are taxable.