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Smart move by Government? B2B is exempt and B2C is taxable?

By bringing the pre-packaged and labelled food items (upto 25 kg packing) under GST ambit, several food items got taxable when sold to B2C while the same item would be exempted if sold to B2B. Thereby eventually increasing the govt revenue.

The government came under heavy shelling on social media after the price of a range of retail items of daily consumption such as rice, wheat, flour, and milk-based products went up Monday.

The very purpose of targeting items, bought by the end consumer, is because there is no ITC burden on the government, and the entire revenue goes to the exchequer,” Arun Kumar said (A GST expert and former additional commissioner of commercial taxes, Karnataka). There are no such gains in B2B transactions as dealers claim input taxes already paid.

"This is just an additional source of revenue for the government. The levy is intended to help States mop up some revenue as the GST compensation they were getting to make up for a shortfall in revenues stopped from July 1," he said.

Tax experts are also critical about the copious references the government has made to the Legal Metrology laws to explain the levy. A comprehensive law such as the one on the GST should be self-sustaining without having to rely on the definitions of some other law to justify or explain a levy, a GST expert said.

Karnataka Chief Minister on Monday said he will seek the intervention of the GST Council to issue a clarification to dealers not to pass on the new GST levy on 'pre-packaged and labelled" goods to consumers.

These levies were not meant to be passed on to consumers, he told media-persons, responding to a volley of questions on the sudden increase in prices of a range of essential items of daily use including puffed rice and milk-based products such as curd and lassi.

The chief minister maintained that the companies were earlier not getting input tax credit (ITC) on the packaging material used for items that did not attract GST. With the levy of GST now, they can claim 'reimbursement' of the input taxes paid, he said.

The Karnataka Chief Minister's clarification, however, baffled GST experts who found it misleading. There are barely any major taxable inputs in most of the items that have now been slapped with a 5% levy, they say.

The Finance Ministry has defined “pre-packaged commodity” as a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a predetermined quantity.


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Author:

TaxReply


Jul 19, 2022


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