Packaged frozen ‘Paratha’ is not a ‘roti or chapatti’ as it requires additional cooking before consumption and although wheat flour is the ‘common thread’ there is other ingredients used in the manufacture of parathas, said an order from the Gujarat Appeal Authority for advance ruling.
These parathas, whether named Malabar, Mixed Vegetable, Onion, Methi, Alu, Laccha, Mooli or Plain, contain ingredients such as margarine, salt, emulsifying agent, oil, potato, peas, cauliflower, coriander powder, bread improver and water, with the exception of wheat flour, which is “very different” from regular roti or chapatti and is therefore not not eligible for the 5% Goods and Services Tax (GST) rate, according to the ruling.
The percentage of wheat flour used by Vadilal Industries, which had approached AAAR, in the eight varieties of paratha manufactured and supplied by it ranges from 36 to 62 percent, while the ingredient for roti or chapatti plain is wheat flour without the water. Moreover, rotis can be eaten directly, but parathas made by the company require cooking before eating, he added.
Ahmedabad-based Vadilal Industries had approached the AAAR against the Gujarat Advance Ruling Authority (AAR) order passed in June 2021, which observed that the parathas sold by the company are not like Khakhra, plain chapatti or roti, which are ready for consumer goods and thus ruled that an 18 percent GST should be levied on such food items.
In a similar decision, the Karnataka bench of the AAR had in 2020 in the case of Bengaluru-based ID Fresh Foods ruled that ‘frozen parotas’ must be processed before consumption and that a 18% GST should therefore be levied on it. Further, the Kerala Bench of the AAR, ruling in the Modern Food Enterprises case in 2021, said frozen ‘parota’ should be classified under the 18% GST tax bracket.
“The Parathas provided by the appellant (Vadilal Industries) are different from ordinary roti or chapatti and cannot be treated or covered by the category of ordinary roti or chapatti”, ruled the Gujarat Bench of the AAAR on September 15, 2022 , noting that an 18 per cent GST should be levied on these items.
KPMG’s tax partner, Abhishek Jain, said disputes in the classification of goods have been commonplace in various tax laws since time immemorial and have been a problem for businesses. To understand the correct classification, various principles are evaluated, such as substance rather than form, technical literature of the product, comprehension in ordinary language, etc.
“While the AARs have clarified various classifications and disputes since the inception of the GST, judgments sometimes vary from state to state. The need right now is to have a central AAR in place to resolve these disputes and ensure uniform applicability across the nation, just like the vision of the GST law,” Jain added.