GST Classification: 'Parotta' Not Exempt as Bread; Subject to 18% Tax

The Authority classified 'Classic Malabar Parota' and 'Whole Wheat Malabar Parota' under Heading 2106 as 'Food preparations not elsewhere specified or included', subject to 18% GST. The products were deemed distinct from bread and ineligible for GST exemption under Notification No. 2/2017, which specifically applies to 'Bread branded or otherwise' under HSN 1905. The decision was based on differences in preparation and market perception between bread and 'Parotta', leading to the exclusion of 'Parotta' from the GST exemption for bread products.

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Issues Involved:
1. Classification of 'Classic Malabar Parota' and 'Whole Wheat Malabar Parota'.
2. Eligibility of exemption from GST under Notification No. 2/2017 - Central Tax/ SRO No.361/2017.

Classification Issue Analysis:
The applicant, a manufacturer of 'Classic Malabar Parota' and 'Whole Wheat Malabar Parota', argued that these products should be classified as bread under Heading 1905 for GST exemption. The products were described as flatbreads made from wheat flour, edible vegetable oil, milk solids, sugar, salt, and yeast. The Authority examined the definition of bread and noted that 'Parotta' falls under the category of bread as per the explanatory note to Heading 1905. The process of preparing 'Parotta' involves mixing, kneading, sheeting, and baking the dough, making it a variant of bread. The FSSAI certification also classified these items as bread, further supporting their classification as such.

Exemption Eligibility Issue Analysis:
The Authority analyzed the eligibility of GST exemption under Notification No. 2/2017 for the specific commodity 'Bread branded or otherwise' covered under HSN 1905. It was argued that 'Parotta' does not fall under this specific commodity as there are substantial distinctions between bread and 'Parotta' in terms of preparation, taste, and usage. The commercial parlance test was applied, highlighting that 'Parotta' is not commonly considered as bread in the market. Additionally, Schedule III of GST Laws categorizes 'Food preparations not elsewhere specified or included' under Heading 2106, which is taxable at 18% GST. Specific exclusions under this heading, such as 'Khakhra' and 'Plain Chapatti or Roti', are taxed at a reduced rate of 5%. The case law cited regarding 'Parata' further supported the classification of 'Parotta' under 'Food preparations not elsewhere specified or included'.

Conclusion:
The Authority ruled that 'Classic Malabar Parota' and 'Whole Wheat Malabar Parota' are classified under Heading 2106 of GST Laws as 'Food preparations not elsewhere specified or included' and are taxable at 18% GST. The exemption from GST under Notification No. 2/2017 is applicable only to the specific commodity 'Bread branded or otherwise' covered under HSN 1905, excluding 'Parotta' from this exemption category. The distinction between bread and 'Parotta' in terms of preparation and usage led to the decision that 'Parotta' does not qualify for the GST exemption meant for bread products.

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