Is GST Mandatory for FSSAI Registered Businesses? Know the Details

Navigating the regulatory landscape for food businesses in India can feel like traversing a complex maze. Among the various compliance requirements, two prominent acronyms frequently surface: FSSAI and GST. For entrepreneurs and established players in the food sector, understanding the interplay between FSSAI registration and Goods and Services Tax (GST) is crucial for smooth operations and avoiding legal pitfalls. A common question that arises is: Is GST mandatory for FSSAI registered businesses?

The short answer, like many things in the realm of taxation, is it depends. While having an FSSAI registration is a prerequisite for operating a food business in India, GST applicability hinges on different factors, primarily the aggregate turnover of the business.

Let's delve into the details to understand the relationship between FSSAI registration and GST, clarifying when GST registration becomes mandatory for food businesses holding an FSSAI registration.

Understanding FSSAI Registration: The Foundation for Food Businesses

The Food Safety and Standards Authority of India (FSSAI) is the apex body responsible for ensuring the safety and standards of food across the country. Operating a food business without the requisite FSSAI registration or license is illegal and can attract hefty penalties.

The type of FSSAI registration or license required depends on various factors, including the scale of operations, the type of food business (manufacturing, processing, storage, transportation, or sale), and the annual turnover. Broadly, FSSAI registration can be categorized into:

Basic FSSAI Registration: This is for small food businesses with an annual turnover of up to ₹12 lakhs. This category typically includes petty food manufacturers, small retailers, hawkers, and temporary stallholders.
FSSAI State License: Businesses with an annual turnover between ₹12 lakhs and ₹20 crores require a State License. This category covers a wide range of food businesses, including medium-sized manufacturers, storage units, transporters, and retailers operating within a single state.
FSSAI Central License: Food businesses with an annual turnover exceeding ₹20 crores, as well as certain specific types of businesses like importers, exporters, and those operating in multiple states, need a Central License.

Obtaining the appropriate FSSAI registration is the fundamental first step for anyone venturing into the food industry in India. It signifies compliance with the food safety standards and regulations laid down by the FSSAI, ensuring that the food products are safe for consumption.

Decoding GST: The Indirect Tax Regime

The Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services. It is a comprehensive, multi-stage, destination-based tax that has subsumed many erstwhile indirect taxes like excise duty, service tax, and VAT.

The GST regime operates on a system of registration, where businesses exceeding a certain threshold of aggregate turnover are required to register and collect GST on their outward supplies, while also being eligible for input tax credit on their inward supplies.

The applicability of GST is primarily determined by the aggregate turnover of a business in a financial year. As of the current regulations, the threshold for GST registration for suppliers of goods is generally ₹40 lakhs in most states and ₹20 lakhs in special category states (like some northeastern states). For suppliers of services, the threshold is generally ₹20 lakhs across all states.

It's important to note that these thresholds are subject to change by the government.

The Interplay: When Does GST Become Mandatory for FSSAI Registered Entities?

Now, let's address the core question: Is GST automatically mandatory simply because a business has an FSSAI registration? The answer is no. Holding an FSSAI registration is about adhering to food safety standards, while GST registration is primarily triggered by the aggregate turnover of the business.

Here's a breakdown of when a food business with FSSAI registration becomes liable for GST registration:

Exceeding the Aggregate Turnover Threshold: If a food business, regardless of whether it holds a Basic FSSAI Registration, State License, or Central License, has an aggregate turnover exceeding the prescribed GST threshold (currently ₹40 lakhs for goods suppliers and ₹20 lakhs for service suppliers), it becomes mandatory for the business to obtain GST registration.
- Example: A small bakery with a Basic FSSAI Registration initially has an annual turnover of ₹10 lakhs. As its business grows and its turnover crosses ₹40 lakhs in a financial year, it will then be required to obtain GST registration, in addition to its existing FSSAI registration.
Engaging in Inter-State Supply: If a food business makes any supply of goods or services to customers located outside its state, GST registration becomes mandatory, irrespective of its aggregate turnover. This is because inter-state supplies fall under the purview of the Integrated Goods and Services Tax (IGST) Act.
- Example: A food processing unit with a State FSSAI License in West Bengal starts supplying its products to retailers in Bihar. Even if its annual turnover is below ₹40 lakhs, it will need to obtain GST registration due to the inter-state supply.
Voluntary Registration: Even if a food business's turnover is below the threshold and it does not engage in inter-state supply, it can still opt for voluntary GST registration. This can be beneficial for businesses that want to avail input tax credit or supply to GST-registered entities who prefer dealing with GST-compliant vendors.
- Example: A home-based food delivery service with a Basic FSSAI Registration and a turnover of ₹8 lakhs might voluntarily register for GST to build credibility with larger restaurant aggregators that are GST registered.
Specific Categories of Businesses: Certain categories of businesses are required to obtain GST registration regardless of their turnover. While not exclusively related to the food sector, if an FSSAI registered food business falls under any of these categories (e.g., those liable to pay tax under reverse charge mechanism), GST registration would be mandatory.

Key Takeaways for FSSAI Registered Businesses Regarding GST

FSSAI registration is about food safety; GST registration is about tax compliance based on turnover and the nature of supply. Holding one does not automatically necessitate the other.
The primary trigger for GST registration is exceeding the aggregate turnover threshold. Keep a close watch on your annual turnover to determine GST liability.
Inter-state supply makes GST registration mandatory, regardless of turnover. If your food business caters to customers in other states, GST registration is a must.
Voluntary GST registration is an option for businesses below the threshold who wish to avail its benefits.
Always stay updated with the latest GST regulations and threshold limits, as these are subject to change.

Practical Implications for Food Business Owners

For food business owners holding an FSSAI registration, it's essential to:

Accurately track your annual aggregate turnover. This will determine when you cross the GST threshold.
Understand the nature of your supplies. If you engage in inter-state supply, be aware of the mandatory GST registration requirement.
Consider the benefits of voluntary GST registration. Even if not mandatory, it might be advantageous for your business operations.
Ensure compliance with both FSSAI regulations and GST laws. These are distinct but equally important for the smooth functioning of your food business.
Seek professional advice from tax consultants to understand your specific GST obligations based on your business model and scale of operations.

Conclusion: Navigating Compliance with FSSAI and GST

In conclusion, while FSSAI registration is a fundamental requirement for operating any food business in India, GST registration is triggered by the aggregate turnover of the business and the nature of its supplies (specifically inter-state supply). Simply having an FSSAI registration does not automatically mandate GST registration.

Food business owners must understand these distinct regulatory requirements and ensure compliance with both based on their specific circumstances. Staying informed about the latest regulations and seeking professional guidance will help food businesses navigate this complex landscape effectively and focus on delivering safe and quality food to consumers. Remember, FSSAI registration ensures you can operate legally in the food sector, while GST compliance ensures you meet your tax obligations as your business grows. Understanding the nuances of both is key to sustainable growth and success in the Indian food industry.