Parotas and Rotis will not be taxed the same. Differentiating between “Roti” and “Parota”, the Authority for Advance Ruling, Karnataka held that the latter does not qualify as “completely cooked food” and therefore, GST at the rate of 18% is leviable on the same.
The said order was passed by the Authority for Advance Ruling, Karnataka in response to an application filed by one ID Fresh Food (India) Pvt. Ltd., a Bangalore-based readymade food products company for advance ruling under Section 97 of CGST Act, 2017 and the KGST Act, 2017read with Rule 407 of CGST and KGST Act 2017.
The Applicant in the present matter sought for more clarity on the GST rates that are levied on Indian bread (Roti, Naan, or parota), thereby asking if the preparation of whole wheat parota and Malabar Parota could be classified under Chapter heading 1905 attracting GST at the rate of 5 per cent. The said heading comprises of product with the following description- “Bread, pastry, cakes, biscuits and other bakers’ wares, whether or not containing cocoa, communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products.”
After analysing the three parameters needed for the classification of products, i.e. Reference to general rules for interpretation of tariff under Customs Tariff Act, 1975, Judicial Precedents and Reference to explanatory notes issued by World Customs Organisation, the Applicant submitted that Parotas come under Section IV and Chapter 19 of the Customs Tariff Act, 1975.
The Applicant further referred to the judgement passed in the matter of M/s Signature International Foods India Private limited wherein it was held by the Advance Ruling Authority, Maharashtra, that Parota and Parota Wraps are covered under entry 99 A of Notification 34/ 2017 Central Tax (Rate) dated 28.06.2017.
In view of the same, the Applicant contended that Whole Wheat and Malabar Parota when compared to Roti are prepared through identical process and hence cannot be classified under the residual entry and hence sought that their products- Whole Wheat parota and Malabar parota be classified under Chapter heading 1905, attracting GST at the rate of 5 percent.
Declining this argument however, the authority observed as follows, “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 impugned products are admittedly not ready for consumption, but need to be heated before consumption. Thus, the impugned products do not merit classification under heading 1905.”
The authority further noted that the impugned product does not have any specific entry in the Customs Tariff Act, 1985. It was thus held that the impugned product is rightly classified under Chapter Heading 2106, as “food preparations not elsewhere specified or included”.
It was then observed that as per Entry 99A to Schedule I of GST Notifications issued in June, 2017 and October, 2017, GST rate of 5% is applicable to the products subject to fulfilment of the following conditions:
(i) They should be classified under heading 1905 or 2106; and
(ii) They must be Khakhra, plain chapatti or Roti.
In the present case, the Authority observed that the first condition of classification is fulfilled as the classification of the impugned products has been resolved as 2106. However, as for as the second condition the Authority said that Parotas are neither Khakhra or plain Chapatti nor Roti.
It was held as follows, “The products Khakhra, plain chapatti 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. These products also require further processing for human consumption, as admitted by the applicant,”.
The petition was accordingly disposed and the impugned product was brought under the 18% GST category.