GST : SUPPLY OF GOODS IN UNIT CONTAINERS

[Dr. Sanjiv Agarwal]

In one of the advance rulings, assessee was supplying animal carcass in its natural shape in frozen state in different weights and sizes in bags. The ruling was sought on whether such supplier can be considered to have been supplied such goods in ‘unit containers’ .

In Re: Ahmednagar District Goat Rearing and Processing Cooperative Federation Ltd.  2018 (5) TMI 1393 - AUTHORITY FOR ADVANCE RULING - MAHARASTRA ;

In the instant case,  Ahmednagar District Goat Rearing and Processing Co-op Ltd. was engaged in slaughtering and processing of sheep/goat meat and supplied these products to Army against tender. It supplied to Army sheep/ goat meat in carcass form i.e. the whole animal carcass in its natural shape in frozen state. Naturally, the carcass would be in different weight and sizes. Further, there was no fixed quantity & size in which these carcasses were dispatched to Army. The said dispatches were made on the basis of the weight of the frozen carcass. Furthermore, the consideration was charged on the basis of weight, The packing and dispatch pattern was as given below:-

Mutton: Each frozen carcass is put in LDPE bag (primary packing ) which is not sealed and no weight is mentioned on such LDPE Bag. Thereafter, generally two of such LDPE Bags are put in HDPE bag (secondary packing) and manually weight of two carcass is mentioned by marker. For instance, if one of the carcass weights 7 Kg and other one weight 6.5 Kg, the HDPE bag would bear the marking as "8 +7.5 =15.5 Kg".

The advance ruling was sought on whether the whole (sheep/goat) animal carcass in its natural shape in frozen state in different weight and size packed in LDPE bags without mentioning the weight and one or two such LDPE bags further packed in HD PE bags being supplied to Army by applicant against tender shall qualify as product put up in ‘unit container’ ? Ruling was also sought on taxability / exemption.

W.e.f. 1.7.2017, the relevant GST notifications provided for the following conditions:

1. W.e.f. from 1st July, 2017 till 14th November, 2017:

•  Must be frozen
• Must be packed in unit container

2. W.e.f. from 15th November, 2017 onwards:

•  Must be frozen
• Must be packed in unit container
• Must bear a brand

The words 'unit container' have been defined similarly in both the Notification No.1-Integrated Tax (Rate) and Notification No, 2/2017- Integrated Tax (Rate) of the IGST Act as under -

The phrase "unit container" means a package, whether large or small (for example, tin, can, box, jar, bottle, or carton, drum, barrel, or canister) designed to hold a predetermined quantity or number, which is indicated on such package.

The product, in question was sheep/ goat meat in carcass form i.e. the whole animal carcass in its natural shape. It is supplied in frozen state in LDPE and HDPE bags. The above definition covers a package and the examples of such a package include a 'bag'.

The aspects which were  examined by AAR are:

• Whether the bag is designed to hold a predetermined quantity or number?
• Whether the quantity or number is indicated on the bag?

It was ruled that the instant packaging  would satisfy the requirement of the definition of ‘unit container’ as found in the Notification No.1-Integrated Tax (Rate) and Notification No. 2/2017- Integrated Tax (Rate) issued under the provisions of the IGST Act. In view thereof, the bags being supplied to Army by the applicant against tender would qualify as product put up in ‘unit container’.

Thus, where whole (sheep / goat) animal carcass in its natural shape in frozen state in different weight and size packed in LDPE bags without mentioning the weight and one or two such LDPE bags further packed in HDPE bags being supplied to Army by applicant against tender, it was ruled that such goods shall qualify as product put up in ‘unit container’ and these products will be covered by schedule entry 4 of Notification No. 1 – Integrated Tax (Rate) during period 1.7.2017 to 13.11.2017. From 14.11.2017 onwards, the products would be covered under schedule entry 1 of Notification No. 1- Integrated Tax (Rate).

The appellate Authority for Advance Ruling has however modified this ruling vide Order dated 11.09.2018 and reported hereunder.

Appellate Ruling

Being aggrieved, the matter went to Appellate Authority for Advance Ruling, Maharashtra [In Re: Ahmednagar District Goat Rearing and Processing Cooperative Federation Ltd.  2018 (9) TMI 1184 - APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA ].

It was observed that  the definition of ‘unit container’ is provided under the CGST Act as an explanation to the exemption Notification and we do not see any reason to resort to the similar definitions available in other Acts/Statutes. So, we will concentrate and restrict our scope to the definition available under the CGST Act which is the subject matter of appeal.

In terms of the said definition, for any package (irrespective of size, nature and shape) to be a unit container, the following two criteria need to be fulfilled-

(i)  It should be designed to hold a pre-determined quantity or number.

(ii)  That pre-determined quantity or number should be indicated on the package.

The nature of supplies was such that it was not possible to decide the exact quantity (either weight or volume) or the number in advance in respect of the packages to be sent to Army as the goods of supplied were natural, not manmade, and no two animals are same. Also, there was no such requirement from the buyer side i.e. Army who had floated the tender on total weight basis and the payments are also made monthly/fortnightly and not as per packages or consignments. The concept of ‘pre-determined’ quantity or number is possible when the buyer/customer/consumer/recipient is aware in advance i.e. before the purchase/receipt of the said goods about the fixed quantity/weight/number contained in the package which was not the case. At nowhere, it was mentioned that the said bags (LDPE or HDPE) should contain any fixed weight/quantity or number of the goods to be supplied. Just by mentioning the weight of the carcass (which may be one or two in number) on the outer packing in no way can be considered as the pre-determined quantity of the package. There is no doubt that the samples of bags produced before us during hearing are covered under ‘package’ as per the definition given in explanation to the notification but that package is not designed to hold any predetermined quantity.

The AAAR held that the whole (Sheep/Goat) animal carcass in its natural shape in frozen state in different weight and size packed in LDPE bags without mentioning the weight and one or two such LDPE bags further packed in HDPE bags being supplied to Army by appellant against tender shall not qualify as product put up in ‘unit container’.