diff --git a/internal/pkg/pkg.go b/internal/pkg/pkg.go
index f43a8bb191..0821ad5e36 100644
--- a/internal/pkg/pkg.go
+++ b/internal/pkg/pkg.go
@@ -22,6 +22,7 @@ import (
 	"os"
 	"path/filepath"
 	"sort"
+	"strings"
 
 	"github.com/GoogleContainerTools/kpt/internal/errors"
 	"github.com/GoogleContainerTools/kpt/internal/types"
@@ -736,9 +737,14 @@ func (p *Pkg) LocalInventory() (kptfilev1.Inventory, error) {
 	if !hasKptfile {
 		// Return the ResourceGroup object as inventory.
 		if len(resources) == 1 {
+			labels := resources[0].GetLabels()
+			delete(labels, rgfilev1alpha1.RGInventoryIDLabel)
+
 			return kptfilev1.Inventory{
 				Name:        resources[0].GetName(),
 				Namespace:   resources[0].GetNamespace(),
+				Annotations: resources[0].GetAnnotations(),
+				Labels:      labels,
 				InventoryID: resources[0].GetLabels()[rgfilev1alpha1.RGInventoryIDLabel],
 			}, nil
 		}
@@ -764,9 +770,14 @@ func (p *Pkg) LocalInventory() (kptfilev1.Inventory, error) {
 
 	// ResourceGroup stores the inventory and Kptfile does not contain inventory.
 	if len(resources) == 1 {
+		labels := resources[0].GetLabels()
+		delete(labels, rgfilev1alpha1.RGInventoryIDLabel)
+
 		return kptfilev1.Inventory{
 			Name:        resources[0].GetName(),
 			Namespace:   resources[0].GetNamespace(),
+			Annotations: resources[0].GetAnnotations(),
+			Labels:      labels,
 			InventoryID: resources[0].GetLabels()[rgfilev1alpha1.RGInventoryIDLabel],
 		}, nil
 	}
@@ -788,8 +799,21 @@ func filterResourceGroups(input []*yaml.RNode) (output []*yaml.RNode, err error)
 			continue
 		}
 
+		ClearInternalAnnotations(meta.Annotations)
+		if err := r.SetAnnotations(meta.Annotations); err != nil {
+			return nil, fmt.Errorf("failed to set annotations for resource %w", err)
+		}
+
 		output = append(output, r)
 	}
 
 	return output, nil
 }
+
+func ClearInternalAnnotations(annotations map[string]string) {
+	for k := range annotations {
+		if strings.HasPrefix(k, "internal.config.kubernetes.io/") || strings.HasPrefix(k, "config.kubernetes.io/") {
+			delete(annotations, k)
+		}
+	}
+}
diff --git a/internal/testutil/pkgbuilder/builder.go b/internal/testutil/pkgbuilder/builder.go
index 8132a25263..0c96e9e901 100644
--- a/internal/testutil/pkgbuilder/builder.go
+++ b/internal/testutil/pkgbuilder/builder.go
@@ -309,6 +309,7 @@ func (sp *SubPkg) WithSubPackages(ps ...*SubPkg) *SubPkg {
 // RGFile represents a minimal resourcegroup.
 type RGFile struct {
 	Name, Namespace, ID string
+	Annotations, Labels map[string]string
 }
 
 func NewRGFile() *RGFile {
@@ -547,8 +548,15 @@ func buildRGFile(pkg *pkg) string {
 	tmp := rgfilev1alpha1.ResourceGroup{ResourceMeta: rgfilev1alpha1.DefaultMeta}
 	tmp.ObjectMeta.Name = pkg.RGFile.Name
 	tmp.ObjectMeta.Namespace = pkg.RGFile.Namespace
+	tmp.ObjectMeta.Annotations = pkg.RGFile.Annotations
+	tmp.ObjectMeta.Labels = pkg.RGFile.Labels
+
+	if tmp.ObjectMeta.Labels == nil {
+		tmp.ObjectMeta.Labels = make(map[string]string)
+	}
+
 	if pkg.RGFile.ID != "" {
-		tmp.ObjectMeta.Labels = map[string]string{rgfilev1alpha1.RGInventoryIDLabel: pkg.RGFile.ID}
+		tmp.ObjectMeta.Labels[rgfilev1alpha1.RGInventoryIDLabel] = pkg.RGFile.ID
 	}
 
 	b, err := yaml.MarshalWithOptions(tmp, &yaml.EncoderOptions{SeqIndent: yaml.WideSequenceStyle})
diff --git a/pkg/live/load.go b/pkg/live/load.go
index da1b587e10..e0282230fd 100644
--- a/pkg/live/load.go
+++ b/pkg/live/load.go
@@ -135,10 +135,18 @@ func readInvInfoFromStream(in io.Reader) (kptfilev1.Inventory, error) {
 	}
 	// Inventory found with ResourceGroup object.
 	if len(rgFilter.Inventories) == 1 {
-		invID := rgFilter.Inventories[0].Labels[rgfilev1alpha1.RGInventoryIDLabel]
+		labels := rgFilter.Inventories[0].Labels
+		invID := labels[rgfilev1alpha1.RGInventoryIDLabel]
+		delete(labels, rgfilev1alpha1.RGInventoryIDLabel)
+
+		annotations := rgFilter.Inventories[0].Annotations
+		pkg.ClearInternalAnnotations(annotations)
+
 		return kptfilev1.Inventory{
 			Name:        rgFilter.Inventories[0].Name,
 			Namespace:   rgFilter.Inventories[0].Namespace,
+			Annotations: annotations,
+			Labels:      labels,
 			InventoryID: invID,
 		}, nil
 	}
diff --git a/pkg/live/load_test.go b/pkg/live/load_test.go
index 5c8f51305e..a21524a03a 100644
--- a/pkg/live/load_test.go
+++ b/pkg/live/load_test.go
@@ -209,6 +209,36 @@ func TestLoad_LocalDisk(t *testing.T) {
 			},
 			rgFile: "resourcegroup.yaml",
 		},
+		"Inventory information taken from resourcegroup in file": {
+			pkg: pkgbuilder.NewRootPkg().
+				WithKptfile(
+					pkgbuilder.NewKptfile(),
+				).WithRGFile(&pkgbuilder.RGFile{
+				Name:      "foo",
+				Namespace: "bar",
+				Annotations: map[string]string{
+					"additional-annotation": "true",
+				},
+				Labels: map[string]string{
+					"cli-utils.sigs.k8s.io/inventory-id": "foo-bar",
+					"additional-label":                   "true",
+				},
+			}),
+			namespace:    "foo",
+			expectedObjs: []object.ObjMetadata{},
+			expectedInv: kptfile.Inventory{
+				Name:        "foo",
+				Namespace:   "bar",
+				InventoryID: "foo-bar",
+				Annotations: map[string]string{
+					"additional-annotation": "true",
+				},
+				Labels: map[string]string{
+					"additional-label": "true",
+				},
+			},
+			rgFile: "inventory.yaml",
+		},
 	}
 
 	for tn, tc := range testCases {
@@ -239,6 +269,14 @@ func TestLoad_LocalDisk(t *testing.T) {
 			})
 			assert.Equal(t, tc.expectedObjs, objMetas)
 
+			// Simplify testing against empty labels and annotations
+			if len(inv.Labels) == 0 {
+				inv.Labels = nil
+			}
+			if len(inv.Annotations) == 0 {
+				inv.Annotations = nil
+			}
+
 			assert.Equal(t, tc.expectedInv, inv)
 		})
 	}
@@ -380,6 +418,39 @@ func TestLoad_StdIn(t *testing.T) {
 				},
 			},
 		},
+		"Inventory using STDIN resourcegroup file with annotations": {
+			pkg: pkgbuilder.NewRootPkg().
+				WithKptfile(
+					pkgbuilder.NewKptfile(),
+				).
+				WithFile("cm.yaml", configMap).
+				WithRGFile(&pkgbuilder.RGFile{
+					Name:      "foo",
+					Namespace: "bar",
+					ID:        "foo-bar",
+					Annotations: map[string]string{
+						"extra-annotation": "hello-world",
+					},
+				}),
+			namespace: "foo",
+			expectedInv: kptfile.Inventory{
+				Name:        "foo",
+				Namespace:   "bar",
+				InventoryID: "foo-bar",
+				Annotations: map[string]string{
+					"extra-annotation": "hello-world",
+				},
+			},
+			expectedObjs: []object.ObjMetadata{
+				{
+					GroupKind: schema.GroupKind{
+						Kind: "ConfigMap",
+					},
+					Name:      "cm",
+					Namespace: "foo",
+				},
+			},
+		},
 		"Multiple inventories using STDIN resourcegroup and Kptfile is error": {
 			pkg: pkgbuilder.NewRootPkg().
 				WithKptfile(
@@ -479,6 +550,13 @@ func TestLoad_StdIn(t *testing.T) {
 			})
 			assert.Equal(t, tc.expectedObjs, objMetas)
 
+			// Simplify testing against empty labels and annotations
+			if len(inv.Annotations) == 0 {
+				inv.Annotations = nil
+			}
+			if len(inv.Labels) == 0 {
+				inv.Labels = nil
+			}
 			assert.Equal(t, tc.expectedInv, inv)
 		})
 	}