Grocery Items HSN Code and GST Rate in India

Groceries refer to food and other essential goods purchased for household consumption. With the advent of the Goods and Services Tax (GST), understanding the grocery HSN codes and the grocery GST rates has become a pivotal aspect for both consumers and businesses in India.

In this article, we decode the GST rate and HSN code on groceries.

Applicability of GST on Grocery Items

Groceries, being an essential part of daily consumption, have been given prime importance under the Goods and Services Tax (GST) regime. The GST Act outlines various rules about the scope, exemptions, e-way bills, place of supply, and invoicing procedures for groceries.

Essential items often have exemptions under the GST law, while processed goods attract higher rates. For the movement of grocery items, e-way bills are generally mandatory if the consignment value exceeds INR 50,000, however, there are certain exemptions. Businesses registered under the GST law are required to follow a standard format for invoicing, and e-invoicing is applicable if the business’s turnover exceeds the applicable limit. 

The place of supply rules determines the type of GST levied, i.e., CGST/SGST or IGST, depending on whether the transaction is within a state or interstate.

Grocery HSN Code and GST Rate

Is ITC Available on Grocery Items?

Input Tax Credit (ITC) is a boon under the GST regime for businesses to set off the tax they have paid on their inputs with their output tax liabilities. But can this benefit be extended to grocery items?

Business Perspective: Businesses, such as grocery stores or supermarkets, can claim ITC on the GST paid for the grocery items they purchase for resale. If a grocery store purchases tea with a grocery HSN code of 0902 and pays 5% GST on it, then this GST can be claimed as input tax credit when they sell the tea to the end consumers and remit the GST collected to the government.

Example: Let's say a business buys tea worth Rs.10,000 and pays Rs.500 as GST. Later, when selling it, the business charges the customer Rs.12,000 for the tea and collects a GST of Rs.600 from the consumers. The net GST liability for the business would be Rs.100 (Rs.600-Rs.500).

Consumer Perspective: As a consumer, you cannot claim an input tax credit on the grocery items that you buy, whether for personal consumption or for consumption in an office or factory (disallowed as per Section 17(5) of the CGST Act) or for gifting. This means the GST on groceries is a cost you bear, adding to the final price of the product. 

Exception Cases: There are certain cases, such as businesses running cafeterias, where groceries are bought not for resale but as a business expense. Here, the ITC can be availed, albeit subject to certain conditions and documentation.

Advance Rulings Related to Grocery HSN and GST

Advance rulings offer a legal cushion and can help you understand the intricacies of how GST on grocery items applies to your operations. There have been a few advance rulings to clarify ambiguities regarding HSN codes and GST rates on grocery items. A significant advance ruling in Karnataka clarified that a specific unbranded product, ‘Pushti’, which is a mixture of various cereals and pulses, falls under HSN code 1106 and attracts a Nil GST rate. Conversely, if the product is branded and packed, it will attract a 5% GST rate. 

FAQs 

1. What is the GST rate on grocery items?

The grocery GST rate varies from item to item, ranging from exempt to 28%. The rate is determined based on the grocery HSN code associated with each specific product.

2. Can businesses claim ITC on grocery items?

Yes, businesses involved in reselling groceries or reselling the same as part of a mixed or composite supply (for example, in restaurants) can claim Input Tax Credit (ITC) on the GST on grocery items that they have purchased.

3. Are consumers eligible for ITC on groceries?

Consumers are not eligible to claim ITC on grocery items. The GST paid is a part of the final price they incur.

4. How are HSN codes relevant in grocery billing?

Grocery HSN codes are crucial for determining the applicable GST rates. They are usually displayed on invoices, helping both businesses and consumers understand taxation.

5. Where can I find accurate GST and HSN code information?

GST rates and HSN code information can be found on the CBIC website. You can also access our free HSN code and GST rate finder here.