Explore GST rates and HSN codes for grocery products in India. Learn about tax applicability, ITC eligibility, and invoicing rules.
Grocery items encompass food and other crucial household provisions. Since the introduction of the Goods and Services Tax (GST), both Indian consumers and businesses must comprehend the applicable Harmonized System of Nomenclature (HSN) codes and corresponding GST rates for these products. This article will clarify the GST rates and HSN codes for various grocery items.
Applicability of GST on Grocery Items
The Goods and Services Tax (GST) framework prioritizes grocery items due to their role in daily life. The GST Act defines specific regulations concerning the scope, exemptions, and procedural aspects such as e-way bills, place of supply, and invoicing for these products. Typically, essential goods are exempt from GST, whereas processed items incur higher tax rates. For transporting groceries, an e-way bill is usually required if the consignment value exceeds INR 50,000, although certain exemptions exist. GST-registered businesses must adhere to a standard format for invoicing, and e-invoicing becomes mandatory once a business’s turnover surpasses the specified threshold. The place of supply rules determine whether Central GST (CGST) and State GST (SGST) or Integrated GST (IGST) is applied, based on whether the transaction occurs within a single state or between states.
Grocery HSN Codes and GST Rates
The following table details the Harmonized System of Nomenclature (HSN) codes and corresponding Goods and Services Tax (GST) rates for common grocery items.
| Grocery Item | HSN Code | GST Rate | |
|---|---|---|---|
| Rice (other than pre-packaged and labelled) | 1006 | 0% | |
| Rice (pre-packaged and labelled) | 1006 | 5% | |
| Wheat flour (other than pre-packaged and labelled) | 1001 | 0% | |
| Wheat flour (pre-packaged and labelled) | 1001 | 5% | |
| Bread (branded or otherwise) | 1905 | 0% | |
| Sugar | 1701 | 5% | |
| Salt | 2501 | 0% | |
| Pepper | 0904 | 5% | |
| Edible oils (such as olive oil, sunflower oil, groundnut oil, coconut oil, etc.) | 1508, 1509, 1512, 1513 | 5% | |
| Fresh and pasteurised milk | 0401 | 0% | |
| Ultra High Temperature (UHT) milk | 0401 | 5% | |
| Butter | 0405 | 12% | |
| Ghee | 0405 | 12% | |
| Tea | 0902 | 5% | |
| Coffee | 0901 | 5% | |
| Spices (various) | 0910 | 5% | |
| Pasta | 1902 | 12% | |
| Muri or puffed Rice | 19041020 | 0% | |
| Corn flakes, prepared goods from cereal flakes (other than puffed rice) | 1904 (other than 19041020) | 18% | |
| Biscuits (non-branded) | 1905 | 18% | |
| Soft drinks (aerated) containing added sugar or other sweetening matter or flavoured | 2202 | 28% (+ 12% compensation cess) |
Input Tax Credit (ITC) Availability on Grocery Items
Input Tax Credit (ITC) allows businesses to offset the tax paid on their inputs against their tax liabilities on outputs under the GST system. The question arises whether this advantage extends to grocery products.
Business Viewpoint: Commercial entities, including grocery stores or supermarkets, are eligible to claim ITC on the GST paid for grocery items acquired for resale. For instance, if a grocery store purchases tea (HSN 0902) and pays 5% GST, this amount can be claimed as ITC when the tea is sold to customers, and the collected GST is remitted to the government.
Illustrative Example: If a business buys tea for INR 10,000, incurring INR 500 in GST, and subsequently sells it for INR 12,000, collecting INR 600 in GST from customers, its final GST payable would be INR 100 (INR 600 – INR 500).
Consumer Viewpoint: Individual consumers are not permitted to claim ITC on grocery purchases, whether for personal use, office/factory consumption (as per Section 17(5) of the CGST Act), or gifting. Consequently, the GST on groceries constitutes an additional cost for the consumer, impacting the product’s ultimate price.
Specific Exemptions: In certain scenarios, such as businesses operating cafeterias, groceries are purchased as a business expense rather than for resale. In these instances, ITC may be claimed, provided specific conditions and documentation requirements are met.
Advance Rulings Pertaining to Grocery HSN and GST
Advance rulings provide legal clarity and assist in comprehending the detailed application of GST on grocery products for business operations. Several such rulings have been issued to resolve uncertainties regarding HSN codes and GST rates for groceries. A notable advance ruling in Karnataka determined that an unbranded product named ‘Pushti’, composed of various cereals and pulses, is classified under HSN code 1106 and is subject to a 0% GST rate. In contrast, the same product, if branded and packaged, would be subject to a 5% GST rate.
