Oct 7, 2020
Ready-to-Cook paratha is in see-saw phase as the food item is to be either taxed at 5% or 18% under the goods and services tax (GST). But the disappointing news for the paratha lovers is that the Appellate Authority for Advance Ruling (AAAR) — Karnataka bench, has abstained from ruling on the applicable rate.
GST laws require that the AAR cannot admit any application for an advance ruling, if the question raised in the application is pending or has already been decided. In this case, the AAAR observed that iD Fresh Foods had not intimated about a proceeding initiated by the director general of GST investigation (DGGI) — Chennai Zone on the issue of classification of parathas. Hence, the AAAR declared the original order of the AAR, against which the appeal was filed as void. As the issue of classification was pending in the proceeding, the AAAR declined to rule on the applicable GST rate.
As the classification issue was pending in another proceeding, the previous ruling of the lower authority, which applied a rate of 18% has been held as void. This leaves the issue open and it’s likely that the litigation will continue.
Sometimes back, a Bengaluru-based food products company – , iD Fresh Food engaged in the preparation and supply of a wide range of ready-to-cook items including whole-wheat paratha and Malabar paratha had approached the AAR — Karnataka Bench. It had contended that parathas should be classified under the product description of ‘khakhara, plain chapati or roti’ (or to be more technical under heading 1905) and thus be taxed at 5%.
id Fresh Foods had informed the AAAR, that its products are not frozen. Malabar parathas can be stored in a cool and dry place and have a shelf life of up to four days, whereas it is recommended that whole-wheat parathas be refrigerated, to enable the product to remain fresh for up to seven days. The products merely required heating, say on a tawa (griddle), prior to serving to ensure crispness. Before the AAAR bench, the company also put forth an additional argument that parathas are species of bread and eligible for GST exemption (aka nil rate).
Earlier in May, The AAR, in its ruling had differed with this classification and held that GST at 18% applied. Given that the GST rate on ready-to-cook rotis or pizza bread is 5%, social media was soon abuzz with memes. Subsequently, iD Fresh Foods filed an appeal with the appellate bench of the AAR.
iD foods said that it has always followed the principle of paying the correct amount of tax, which on parathas is either 0% or 5% and will be following the due process of law in establishing the correct rate of tax payable; as against the ruling of the AAR, which indicated it to be 18%.It further added that their application to the AAR was made with bona fide intention. The AAAR has nullified the previous ruling, on a different point — on jurisdiction.