Flour mills get GST exemption on branded packs with rider

Move provides relief to 1,400 mills facing stiff competition from unbranded packs

In a major relief for about 1,400 flour mills, the central government has granted conditional exemption from the goods and services tax (GST) for branded pack producers of atta (wheat flour), maida (refined wheat flour) and besan (gram flour).

A finance ministry circular dated Wednesday, September 20, said the GST council in its 21st meeting on September 9 had recommended five per cent GST on branded flour. All brands registered as on May 15 and having an actionable claim or enforceable right in a court of law are covered.

However, the circular adds that the five per cent levy will not apply if the person concerned voluntarily forgoes any actionable claim or enforceable right on such brand name. For this, the brand owner would have to file an affidavit claiming to forgo the claim or enforceable right on the brand name with the jurisdictional commissioner of Central, State or Union Territory tax.

"It is a great relief to flour mills with regional brand presence and without having any actionable claim or enforceable right. Such regional players only publish a brand name on a pack to identify the packet, without much to claim on it. The government's clarification would help survival of over 1,400 flour mills that were facing stiff competition from another 500 mills with huge unbranded pack volumes," said D Manikchand Gadiya, managing director, North Karnataka Roller Four Mills.

The ministry's circular also directs brand owners to print in indelible ink, both in English and the local language, on each unit container that in respect of the brand name printed on it, he has voluntarily forgone the actionable claim or enforceable right.

Since the five per cent GST was levied on branded packs with a registered trademark, many such entities had surrendered their registrations to get out of the GST ambit.

"The government's conditional exemption was needed for survival of small but aspiring flour mills. Hence, the circular in this regard is a welcome move," said a senior industry official.