Branded Foods Companies Can No Longer Game GST Regime
GST Council changes rules to stop branded food companies from gaming new tax regime.
The GST Council met in Hyderabad on Saturday and decided to end the efforts of some food companies to game the GST regime.
Finance Minister Arun Jaitley said in a media conference after the meeting that some unbranded food items, sold loose, attracted a GST rate of zero percent, whereas branded food was taxed at 5 percent. The definition of branded covered items having a registered trademark.
As a result of this a few food companies had started to deregister their trademarks and sell the goods under deregistered trademarks or the corporate brand to gain a tax advantage.
Hence the GST Council has made an amendment to say that if food stuff being sold falls into any one of two categories the applicable tax rate would be 5 percent. The two categories are
- If on May 15, 2017 the item had a registered trademark
- Or if the item had a trademark or name on which it is entitled to maintain an actionable claim
Food industry had started getting trademarks deregistered and started selling under deregistered trademarks or the corporate brand. This created an inequality of trade. By these practices, some got a tax advantage. So we amended the requirements.Arun Jaitley, Finance Minister
The decision will ensure that all branded food products have the same treatment, so long as brand owner wants to legally protect it, Pratik Jain, partner and indirect tax leader at PwC India told BloombergQuint.