Jan 19, 2021
The Authority for Advance Rulings (AAR) has ruled that the traditional snack food ‘papad’ is not the same as packaged ‘un-fried fryums and cannot have similar tax treatment.
In its order rejecting a petition seeking to bring irregular-sized packaged snack food as referred to as un-fried fryums at par with papad for applicability of GST, the AAR said that in the matter of the product under reference, where no clear definition has been provided in the statute, the principle of common parlance is used.
This means interpretation of statutes for deciphering the mind of the lawmaker rather than any other scientific reasoning.
With this understanding, papad cannot be compared with any other un-fried fryums and hence it is accountable to pay 18 per cent GST, as against nil GST applicable for papad, the AAR has said.
The AAR ruling brings further clarity in matters of taxation disputes where no clear definition of a product category is available but rates are fixed based on the principle of common parlance.
In this particular case, it is clear that all other ‘un-fried packaged food’ have been considered as ‘namkeen’ and not as ‘papad’. Hence, they attract different tax rates as compared to the traditional food item.
With this one can observe that all these classification disputes would be the next big litigation area in GST, and practically bite every industry wherever an exemption or a lower rate of tax is being paid.