The Gujarat Appellate Authority for Advance Rulings (AAAR) has now determined that the ready-to-eat food would be taxed at an 18% rate, making it difficult to determine the goods and services tax rate on fryums papad.
In this regard, it changed the judgement of the state-based Authority for Advance Rulings somewhat (AAR). The AAR also directed that certain items be subject to 18% GST, but under a different category.
Previously, the Gujarat AAAR decided in two separate cases that fryums would be exempt from GST.
In the current issue, Alisha Gruh Udyog, which sells ready-to-eat fryums, has argued in its petition that it is a settled legal matter that fryums are exempt from GST.
The GST rate is determined by categorising items using the harmonised system of nomenclature (HSN) codes.
AAR agreed with the GST authorities that these fried items should be classified under HSN code 2106, which charges 18% GST.
The petitioner, on the other hand, maintained that their goods should fall under the 1905 HSN code, which attracts no GST.
AAAR discovered that HSN 2106 contains sweets and namkeens. It was agreed that fryums should be classified as HSN 1905. It did not, however, agree with the petitioner that it would fall under Article 96 of 1905, which covers papad. According to AAAR, this category is for papad goods that are ready-to-cook but require roasting or frying before eating.
However, the petitioner’s products are ready-to-eat, fried fryums with masala, wrapped in compact packets, and do not require any additional roasting or frying because they are already fried with masala and can be consumed immediately.
As such, they should be classed under HSN 1905 entry 16, which covers pastries, cakes, biscuits, and other baker’s goods. The entry is subject to an 18% tax rate.
According to Sandeep Sehgal, partner (tax) at AKM Global, “The situation is compounded by many sets of judgements.” The recent Gujarat AAAR judgement contradicts an earlier order on a similar subject issued a few months ago, and hence the taxation of papad remains murky.