Parathas are not Rotis or Chaptatti and will attract 18% GST says Authority
Parathas and rotis form part of the daily food intake of the country often consumed interchangeably. A major distinction will not be made by consumers while eating a paratha or a roti. However, this is not the case under the GST Regime. Authority for Advance Rulings (AAR) – Karnataka has distinguished between rotis and parathas and has taxed the later at a higher rate of 18%. Whereas, owing to Entry 99A of Schedule 1 to GST notifications, rotis are subject to a lower rate of 5% Let us refer to the advance ruling of ID Fresh Food (India) Pvt. Ltd. (GST AAR Karnataka) to understand the same.
Facts of the Case:-
ID Fresh Food (India) Pvt. Ltd (Applicant) is a food products company involved in preparation & supply of wide range of ready to cook, fresh foods including idli & dosa batter, Parathas, Chapatis, curd, paneer, whole wheat paratha and Malabar paratha.
Issue for applying for advance ruling
Whether the preparation of Whole Wheat paratha and Malabar paratha be classified under Chapter heading 1905, attracting GST at the rate of 5%?
Findings of AAR
- The products provided by the applicant are not readily consumable (ready to eat), but need to be heated before consumption.
- The applicant contends that their products merit classification under heading 1905, whose description akin to “Khakhra, plain chapatti or roti” and therefore are taxable at 5% GST, in terms of entry No.99A of Schedule I to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No.34/2017-Central Tax (Rate) dated 13.10.2017.
- In view of the above the question before this authority to decide is whether the impugned products are classifiable under heading 1905 or not. Heading 1905 covers Bread, Pastry, Cakes etc, which are completely cooked foods and ready for consumption.
- The products having description “paratha” do not have any specific entry in the Customs Tariff Act, 1985/ GST Tariff.
- The products covered under heading 1905 are already prepared or completely cooked products and no further process is required to be done on them for consumption and hence they are ready to use food preparations.
- In the instant case the products (paratha) are admittedly not ready for consumption, but need to be heated before consumption. Thus the products do not merit classification under heading 1905.
- The applicant, with regard to the competing tariff entry for classification of the impugned products, contends that their products are specifically covered under heading 1905 and hence should not be classified under the residual entry at Sr. No. 453 of the Schedule III to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended, which pertains to Goods which are not specified in Schedule I, II, IV, V or VI
- Attention was drawn to heading 2106 which covers food preparations not elsewhere specified or included.
- In the instant case the impugned goods i.e. ‘paratha’ is not covered under any other heading and also need to be processed for human consumption. Therefore the goods are rightly classifiable, more specifically, under heading 2106.
- Now the remaining issue to be discussed, is the applicability of the benefit of entry No.99A of Schedule I to the Notification No. 1/2017-Central Tax (Rate), as amended by Notification No.34/2017-Central Tax (Rate), which specifies the applicable rate of GST as 5%, in respect of the goods covered under heading 1905 or 2106 and having description as “Khakhra, plain chapatti or roti”.
- It could be seen from the foregoing that the GST rate of 5% is applicable to the products subject to fulfillment of the conditions that
- they should be classified under heading 1905 or 2106
- they must be either khakhra, plain chapatti or roti.
- In the instant case the first condition of classification is fulfilled as the classification of the impugned products has been resolved as 2106. As for as the second condition is concerned the impugned products are described as “paratha” and hence are neither khakhra, plain chapatti nor roti.
- Further the products khakhra, plain chaptatti or roti are completely cooked preparations, do not require any processing for human consumption and hence are ready to eat foods preparations, whereas the impugned products are not only different from the said khakhra, plain chapatti or roti but also are not like products in common parlance as well as in respect of the essential nature of the product.
Therefore, as parathas require further processing for human consumption, the benefit of entry No.99A of Schedule I to the Notification No. 1/2017-Central Tax (Rate), as amended vide Notification No.34/2017-Central Tax (Rate) is not applicable and thus sale of ‘parathas’ is taxable at 18% instead of 5%.
CBIC has clarified its limited to frozen (and preserved) wheat parota and malabar parota available in ambient and frozen form with a shelf life of 3-7 days is not plain roti but is a distinct product
Hence, such frozen and preserved parota is not like a plain roti, khakra etc. Accordingly, the AAR held that such frozen and preserved parota would not be entitled to concessional GST rate as available to roti (plain roti, khakra etc attracts concessional GST rate of 5% GST)
It has been held by AAR that frozen and preserved parota would attract GST at the rate of 18%.