De-Registering the food brands could not escape GST

The government has decided to plug a loophole for food companies, which were deregistering their brands to avoid paying 5% goods and services tax (GST).

Sources said to check “tax avoidance”, any brand which was registered on or before May 15, will be deemed to be registered for paying GST, even if it is successfully deregistered. The registration under the Copyright Act or similar law abroad on or before May 15 will be treated as valid. While unbranded cereals, pulses and several other food products do not attract GST, those sold in “unit containers” and sold under a registered brand name attract 5% levy. As a result, several brands, including some prominent basmati rice players, had deregistered some of the brands to avoid paying GST.

Industry representatives have sought an end to the differential tax treatment, which the government is not keen on. The government believes that unbranded food products should not face a levy as they are consumed by the poor. While this had attracted the finance ministry’s attention a couple of weeks ago, the issue has now been taken up at the level of the GST Council, headed by finance minister Arun Jaitley, with his counterpart from the states being members.

On Saturday, Jaitley had said that the government had found a way to check avoidance but did not elaborate on the strategy. Sources said that the plan using May 15 as the cut-off date is expected to be finalised at the GST Council meeting next month.