GST on Branded Food Products
When the GST Council fixed the GST rates, it was decided that GST on packaged food products (Cereals, pulses, flour, etc.) will be at the rate of 5%. If the same food products are unbranded and sold loose, GST rate of 0% will be applicable. This led to many businesses deciding to deregister their brand name and sell the goods under deregistered trademarks or the corporate brand to gain a tax advantage. By doing this, they could avoid the 5% GST on account of the product being a branded product. However, the GST Council has now decided to plug this loophole and ensure a level playing field for all. Let us understand the implications on branded food products in this regard:
1. A brand registered under the trademarks act, 1999 as on 15th May, 2017 will be considered as a registered brand
Any brand that is registered under the Trademarks Act, 1999 as on 15th May, 2017 will be considered as a registered brand, even if the brand has been deregistered on a later date. This means that 5% GST will be applicable to products sold under these brand names, even if the brand names have been deregistered on a later date.
2. A brand registered under the copyright act, 1957 as on 15th May, 2017 will also be considered as a registered brand
Initially, the Government had notified that only brands that are registered under the Trademarks Act, 1999 will be considered as registered brands. However, now it has been notified that brands registered under the Copyright Act, 1957 as on 15th May, 2017 will also be considered as registered brands.
3. A brand registered in any other country as on 15th May, 2017 will be considered a registered brand
Now, brands registered in a foreign country as on 15th May, 2017 will also be considered as registered brands and will be liable to pay GST @ 5% on supplies.
4. A mark or name in respect of which an actionable claim is available will be considered a registered brand name
An actionable claim is a right which is enforceable in a court of Law. If a producer of a product has an enforceable right to a mark or brand name, it will be considered to be a registered brand name and 5% GST will be applicable.
In case the producer forgoes his right to the mark or brand name, it will not be considered as a registered brand name and GST @ 0% will be applicable. However, for this, the producer has to fulfil the following 2 conditions:
- The person has to file an affidavit with the Commissioner of Central or State or Union Territory Tax, as applicable, stating that he has forgone his actionable claim or enforceable right to the brand name.
- The person has to print in indelible ink on every unit of the product, both in English and the local language, the fact that he has forgone his actionable claim or enforceable right in respect of the brand name.
Hence, this notification by the Government helps in providing equal treatment to all branded food products sold in India. Producers of branded food products should make note of this notification and ensure that they charge 5% GST on packaged food products.
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