Goods and Service Tax (GST) has been a critical topic since its implementation in India on July 1, 2017. The confusion around GST exemption on Non-branded food items has been a hot topic, especially for Small and Medium Business owners and Startup founders. The lack of clarity on the subject has led to confusion amongst taxpayers.
The GST law clearly states that food items are exempted from GST, but there is confusion around the exemption on Non-branded food items. To understand the confusion surrounding the exemption, it is essential to understand the difference between branded and Non-branded food items.
Branded food items are those that have a registered trademark, logo, or name. These products are manufactured by a company, and the company is responsible for the quality of the product. The company is also responsible for the branding, marketing, packaging, and distribution of the product. Examples of branded food items are Maggi, Pepsi, Coca-Cola, etc.
Under GST, branded food items are subject to a tax rate of 5%.
Non-branded food items, on the other hand, are those that do not have a registered trademark, logo, or name. These products are manufactured by small and medium-sized enterprises and are generally sold unbranded or under the name of a local shop. Examples of Non-branded food items are raw vegetables, fruits, unprocessed cereals, etc.
As per GST, Non-branded food items are exempted from tax. However, there is confusion around the exemption on Non-branded food items, and this has led to many debates and discussions.
The confusion around GST exemption on Non-branded food items arises from the lack of clarity in the definition of Non-branded food items. The GST law does not provide a specific definition of Non-branded food items, which leads to confusion.
Many small and medium-sized enterprises argue that their products should be classified as Non-branded food items and should be exempted from GST. However, the tax authorities have a different view and believe that many products sold as Non-branded food items are, in fact, branded products.
The tax authorities argue that Non-branded food items are those that are sold without any specific branding, packaging, or marketing. However, many small and medium-sized enterprises argue that their products are Non-branded food items as they are sold under the name of the local shop.
The confusion around GST exemption on Non-branded food items is because of the lack of clarity in the definition of Non-branded food items. The tax authorities and small and medium-sized enterprises have a different opinion on what constitutes Non-branded food items.
It is essential to understand the difference between branded and Non-branded food items to avoid confusion around GST exemption. Branded food items are subject to a tax rate of 5%, while Non-branded food items are exempted from tax.
Small and medium-sized enterprises must ensure that their products meet the definition of Non-branded food items to claim the exemption. They should also maintain proper records and documentation to avoid any disputes with the tax authorities.
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