GST Exemption on Non-Branded Foods: Clarified Walking into a local grocery shop and purchasing a kilo of loose rice can leave you wondering why there was no tax shown on your purchase receipt from the local grocery shop. However, when you go to a supermarket the following day to buy the same rice in a sealed packet, you see that it has a 5% GST applied to it. Seems Confusing to us, right?
Since the implementation of GST 2.0 in late 2025 , the way we look at what we eat has undergone some drastic changes. Although the government is trying to ensure that the "common man's plate" remains affordable, the distinction between what is "branded" and "non-branded" has left many small businessmen and consumers perplexed. Whether you are a businessman trying to calculate your prices, a student preparing for commerce exams, or a conscious consumer, this article is for you.
How is Food Taxed by GST in India? In India, there are different GST rates applied when purchasing food items. GST is not a blanket tax but will vary according to food item types based on need and use.
GST Rate Types: 1) 0% taxable (Nil): Fresh fruits and vegetables, unbranded grains, etc.
2) 5% taxable (Merit): Most packaged or "labeled" food items.
3) 18% taxable: Luxury/processed items (certain chocolates, flavored syrups).
4) 40% taxable (Sin Tax): Carbonated sugary beverages.
The above rationales are consistent; if you buy raw or unprocessed food to prepare for yourself, it should be free of tax. If you buy processed, packaged, or branded food it will have GST applied.
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GST Exemption on Non-Branded Foods The phrase "GST exemption for non-branded foods" essentially describes products sold in "loose" form (i.e, not contained or labeled). You are not required to pay GST on these types of products at all.
Grocery Store Rule (Pre-packaged and Labeled) Beginning in July 2022, and further specified by the 2025-2026 amendments, the government has defined this rule not only by the word "branded" but rather by whether the item is sold "pre-packaged and labelled" under the Legal Metrology Act.
Exempt (0% GST): If you purchase 5 kg of wheat out of a public bag, your GST is 0% because the wheat was not sold in "packaged and labelled" form.
Taxable (5% GST): If you had purchased the same amount of wheat that was already pre-packaged as a 5 kg bag (with all labelling completed), you would pay a 5% sales tax on this transaction.
What led to the change? Previously larger corporations were able to sell their goods without registering as a way of avoiding taxes. By shifting the focus to "pre-packaged" goods, the government has created an equal distribution of goods for all. However, in order to protect the lower income population, GST exemption rules do apply to items sold in bulk (generally above 25 kg or 25 liters).
Difference Between Branded And Unbranded Goods Knowing how to classify non-branded and branded goods is easier if you analyze first what the purpose for which it was packaged for sale was.
Feature Non-Branded / Loose Branded / Pre-packaged Packaging Packed at the time of sale in front of the customer. Packed beforehand in a factory or warehouse. Labels No brand name, no MRP, no batch number. Features a brand name, logo, and statutory declarations. GST Rate 0% (Exempt) 5% (Standard Merit Rate) Examples Loose milk, open pulses, loose flour. Amul Milk, Tata Sampann Dal, Aashirvaad Atta.
Pro Tip for Small Shops: If you pack things at your store when the consumer is watching you do so, you still fall under the exemption. However, once you have completed packaging (pre-packing) the items ahead, then you will be considered taxable by law, and the applicable GSTerms will apply.
Also Check Out: GST Rates and 1001 HSN Code for Wheat and Meslin
Government’s Latest Clarification The 56th GST Council meeting provided a much needed update regarding the implementation of GST 2.0 and brought some clarity to many of the areas where things had previously not been properly clarified.
Indian Breads: Indian breads such as plain unbranded roti's, parathas have all been moved to the 0% slab so as to assist with lowering household kitchen costs.
Dairy Relief: All branded curd and lassi's attract GST, therefore the council has clarified that loose curd sold in greater than 1kg units by local dairies remains totally exempt from GST.
The 25kg threshold: A significant clarification made on this matter is how, when pre-packaged bags of product contain greater than 25kg (for solids) or greater than 25 litres (for liquids) then those will be classified as wholesale packs and therefore are exempt from GST. This is why you see 26kg sacks being sold in your markets today, it is a way for businesses to keep the price down for consumers!
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Impact on Consumers & Small Businesses For Consumers Consumers can save money on groceries from the exemption of GST on food that is not branded. If a family purchases loose or locally produced staples (i.e., rice or dal), they would save approximately Rs 500-Rs 1,000 every month based upon a grocery budget of Rs20,000.
For Small Traders The local small trader will have a competitive advantage over large grocery chains as they will sell many of their products in "loose" packaging.
However, they should take care to comply with GST requirements regarding pre-packaged items such as half-kilogram or one-kilogram bags of product and charge equal to or less than the GST rate on those packages and “If their total sales (regardless of whether they sell exempt goods or not) are greater than Rs 40,000 , they must register under GST laws.”
Key Takeaways There's no GST on some types of food (loose/unbranded) such as rice, wheat, lentils and vegetables as they'll be taxed 0% .
Unbranded pre-packaged or pre-labeled food will be taxed 5% GST.
If someone packages food in front of you, it won't be considered taxable.
A single bag/package of staples weighing over 25kg will be exempt from being taxed under the pre-packaged restrictions.
According to the latest GST clarification, bread that is made in India and unbranded is now taxable at 0% GST.
Conclusion To survive in the Indian marketplace in 2026, you must know how GST exemptions work when buying non-branded food items. The government must find a way to make sure that they collect enough revenue, while at the same time continuing to make basic nutritious foods affordable, so they do not hinder nutritional access for Indian citizens.
The increase in consumer demand for "branded" food items gives consumers convenience and promised quality; however, both types of product can be found for cost savings. As such, the only way to stay informed, and ensure your continued contact with our GST exemption regulations, is to keep pace with these rules so that you never wind up overpaying.
FAQs 1. Will GST be charged if I do not have a Registered Brand Name? Yes, effective 2022 the law does not care if your brand is "registered" or "unregistered". If your product is "pre-packaged and labeled" then it will also be subject to a 5% GST Tax.
2. I bought Pulses from my local grocery store that are packed in plastic bags with only a price sticker on them. Is that subject to GST? If the store owner packed the product in front of you and placed a label on the bag after they packed it then that product would be "Pre-packaged" and will have a GST rate of 5%. If the owner packed them after you requested the item then that product will be exempt.
3. How can it be that a 26Kg bag of rice costs less than two 10Kg bags of rice? The reason that a single 26Kg bag of Rice can be cheaper than 2 ten-kilo bags is because bags that are greater than 25Kg are exempt from GST, however 10Kg bags will be taxed at 5% because they are sold to customers as "Retail Pre-packaged".
4. Are both Fresh Fruit and Fresh Vegetables Taxable? Fresh Fruits and Fresh Vegetables will always qualify to be exempt from GST at the 0% rate, this means that they will always be GST exempt regardless if you purchase them at a roadside produce stand, or in a High End Shopping Mall. However if you are purchasing Frozen or Processed Fruits (Example: Canned Pineapples) those fruits will be subject to a GST Tax.
5. Does a GST Bill Need to be Issued by the Shopkeeper for Loose Wheat? The Shopkeeper will not be required to collect Tax on an Exempt(0%) Item, However A Registered Dealer will still need to Issue A 'Bill of Supply' (rather than a 'Tax Invoice').
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