Smart move by Government? B2B is exempt and B2C is taxable?

By bringing the pre-packaged and labelled food items (upto 25 kg packing) under GST ambit, several food items got taxable when sold to B2C while the same item would be exempted if sold to B2B. Thereby eventually increasing the govt revenue.

The government came under heavy shelling on social media after the price of a range of retail items of daily consumption such as rice, wheat, flour, and milk-based products went up Monday.

The very purpose of targeting items, bought by the end consumer, is because there is no ITC burden on the government, and the entire revenue goes to the exchequer,” Arun Kumar said (A GST expert and former additional commissioner of commercial taxes, Karnataka). There are no such gains in B2B transactions as dealers claim input taxes already paid.

These levies were not meant to be passed on to consumers, he told media-persons, responding to a volley of questions on the sudden increase in prices of a range of essential items of daily use including puffed rice and milk-based products such as curd and lassi.

The chief minister maintained that the companies were earlier not getting input tax credit (ITC) on the packaging material used for items that did not attract GST. With the levy of GST now, they can claim 'reimbursement' of the input taxes paid, he said.

The Karnataka Chief Minister's clarification, however, baffled GST experts who found it misleading. There are barely any major taxable inputs in most of the items that have now been slapped with a 5% levy, they say.

The Finance Ministry has defined “pre-packaged commodity” as a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a predetermined quantity.

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