Tiruppur: 25-kg bags gain a kilo as rice mills find ingenious way to shed 5% GST

TIRUPPUR: In an ingenious way to sidestep the new GST regulation, rice mills in Tiruppur district have increased the packaging weight by a kilo to avoid tax. As per the new regulations, all unbranded and pre-packaged items weighing up to 25 kg will attract 5% GST. Mills, however, are selling rice in 26 kg bags.

Explaining the development, Tiruppur Rice Mills and Merchants Association president KCM Duraisamy said, “We were shocked when the Centre brought several essential commodities under GST. It said 5% GST would be imposed even on unbranded items if they are pre-packaged and labelled.

Earlier, only branded items attracted GST. A common man buying 25 kg for `1,000 will now have to pay `50 extra. But for mills and traders too, this created problems... if the turnover touches `1 lakh, they have to get an e-way bill. So, we decided to pack rice in 26 kg bags. Traders will buy 26 kg bags and sell to customers in small quantities without labeling.”

C Devaraj, owner  of Jagajothi Mills, said, “The new rule has created discomfort for both traders and public. Large traders and distributors were upset with the taxation on all packs weighing less than 25 kg. So, based on public demand, we changed our packing to 26 kg.”

When asked if this is tantamount to tax evasion, experts said increasing the weight will not attract GST levy. Institute of Chartered Accountants of India Tiruppur Chapter president MP Varadharajan said, “It is a legal loophole which is cleverly exploited. The GST Council said unbranded items will attract 5% GST if they are pre-packaged and labelled... This cannot be treated as tax evasion.”

Hundreds set to benefit
According to industry sources, there are more than 200 rice mills and hundreds of traders  in Tiruppur district. These include 125 mills in Kangeyam and Dharapuram, 40 mills in Tiruppur union, 8 mills in Avinashi, 9 mills in Uthukuli.