The problem was that the Chakra provider was missing for the component in turn with no breakpoints configured. Adding the Context provider in the component library will fix the issue by providing default theme but will override the theme of the application that consumes this component causing theming issue. Marking the Chakra ui as peer dependency and excluding it from the roll up will ensure the theme is provided from the consuming application without theme conflict.

refer following discussion for details https://github.com/chakra-ui/chakra-ui/discussions/4534, and thanks @goutamsamal9 for helping figure it out.