GST on grains, pulses and other items with or without brand name

For any law to be formulated, a bill is introduced. A bill is the draft of a legislative proposal, which when passed by both houses of Parliament and assented to by the President, becomes an Act of Parliament. Rules are then formed thereby implementing the provisions of the act. To make changes to the rules and to notify rates, exemptions, etc. notifications are issued from time to time. And then there are circulars and orders that generally clarify the intention of the law makers where there are ambiguities.

After the advent of the Goods and Services Tax (GST) regime on 1^stJuly 2017, several notifications have been issued thereby notifying the rates or notifying the exemptions or amending the rules from time to time. In this article, we’ll specifically discuss the rate notifications in case of grains, pulses, rice, etc. the taxability of which has been established based on the concept of brand name. 

Notification 1/2017 Central Tax (Rate) dated 28^thJune 2017 was issued thereby notifying the rates of several goods. A few entries of this notification are as follows:

Chapter/ Heading/ Sub-heading/ Tariff item	Description of Goods
0406	Chena or paneer put up in unit container and bearing a registered brand name
0409	Natural honey, put up in unit container and bearing a registered brand name
0713	Dried leguminous vegetables, shelled, whether or not skinned or split [put up in unit container and bearing a registered brand name]
10	All goods i.e. cereals, put up in unit container and bearing a registered brand name
1006	Rice put up in unit container and bearing a registered brand name
1008	Buckwheat, millet and canary seed; other cereals such as Jawar, Bajra, Ragi] put up in unit container and bearing a registered brand name
1101	Wheat or meslin flour put up in unit container and bearing a registered brand name.
1103	Cereal groats, meal and pellets, including suji and dalia, put up in unit container and bearing a registered brand name

The notification has further explained the terms “unit container” and “registered brand name”.

(i) The phrase “unit container” means a package, whether large or small (for example, tin, can, box, jar, bottle, bag, or carton, drum, barrel, or canister) designed to hold a pre- determined quantity or number, which is indicated on such package. 

(ii) The phrase “registered brand name” means brand name or trade name, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person, and which is registered under the Trade Marks Act, 1999. 

Also, notification 2/2017 Central Tax (Rate) dated 28^thJune 2017 was issued thereby notifying the goods that were exempted from tax. For all the above mentioned illustrative entries, the words “other than put up in unit containers and bearing a registered brand name” were added. 

This implied that those goods of specified categories (grains, pulses, paneer, natural honey, etc.) would be exempt if sold without being put up in unit containers and without any registered brand name. 

The above notifications were further amended vide Notification No. 27/2017 – Central Tax (Rate) dated 22^ndSeptember 2017 and Notification No. 28/2017 – Central Tax (Rate) dated 22^ndSeptember 2017. Notification 27/ 2017 amended Notification 1/2017 as follows:

for the words “put up in unit container and bearing a registered brand name”, the words, brackets and letters “put up in unit container and,- 

(a) bearing a registered brand name; or
(b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or any enforceable right in respect of such brand name has been voluntarily foregone, subject to the conditions as in the ANNEXURE]”, shall be substituted; 

Further, the explanation of the phrase “registered brand name” was substituted as follows:

“(ii)(a) The phrase “brand name” means brand name or trade name, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person. 

(b) The phrase “registered brand name” means,-
(A) a brand registered as on the 15th May 2017 under the Trade Marks Act, 1999. irrespective of whether or not the brand is subsequently deregistered;
(B) a brand registered as on the 15th May2017 under the Copyright Act, 1957(14 of 1957;
(C) a brand registered as on the 15th May2017 under any law for the time being in force in any other country.”; 

ANNEXURE 

For foregoing an actionable claim or enforceable right on a brand name,- 

(a) the person undertaking packing of such goods in unit containers which bear a brand name shall file an affidavit to that effect with the jurisdictional commissioner of Central tax that he is voluntarily foregoing his actionable claim or enforceable right on such brand name as defined in Explanation (ii)(a); and 

(b) the person undertaking packing of such goods in unit containers which bears a brand name shall, on each such unit containers, clearly print in indelible ink, both in English and the local language, that in respect of the brand name as defined in Explanation (ii)(a) printed on the unit containers he has foregone his actionable claim or enforceable right voluntar i ly. ”. 

On similar lines Notification No. 28/2017 – Central Tax (Rate) amended Notification No. 02/2017 – Central Tax (Rate) to provide exemptions to such goods. 

Interpretation:

On reading of the above entries in the notifications and explanations thereof, the following interpretations are drawn:

1. Pulses, cereals, rice, paneer, natural honey, wheat, suji, daliya, etc. when put in containers including a plastic bag and such containers bear the brand name that indicates a connection in the course of trade between such goods and a person using such name or mark with or without any indication of the identity of that person, the applicable GST rate is 5%. 
2. When such goods are sold in loose form without a name or a mark, such as symbol, monogram, label, signature or invented word or writing, the applicable GST rate is NIL.
3. Difference between registered brand name and brand name on which actionable claim or enforceable right is available in the court of law:
   1. If the brand name is registered as on the 15th May 2017 under the Trade Marks Act, 1999 or under the Copyright Act, 1957 or under any law for the time being in force in any other country, it will be treated as a registered brand name.
   1. Any other brand name would be unregistered brand name. However, even in case of an unregistered brand name, suitable action i.e. legal recourse can be undertaken in the court of law. 

In case of unregistered brand name, for foregoing an actionable claim or enforceable rights on a brand name and to avail GST exemption of NIL rate –

• The person who undertakes packing, has to file an affidavit with the jurisdictional commissioner of Central tax that he is voluntarily foregoing his actionable claim or enforceable right on such brand name; and
• Such a person should clearly print in indelible ink, both in English and the local language, that in respect of the brand name printed on the unit containers he has foregone his actionable claim or enforceable right voluntarily 

• There are other laws like the Legal Metrology Act and the Food and Safety Standards that may require specific disclosures to be made on the products. Some of these disclosures like name and address of the manufacturer may create a connection in the course of trade between such specified goods and the person using such name or mark thereby qualifying to fit in the definition of “brand name” as per these notifications. These have to be lawfully vetted separately in each case to determine whether or not these will be treated as brand name.