2022 (10) TMI 308 - AAAR - GST

Parathas classified under different tax code than plain chapatti, ineligible for concessional 5% GST rate

In Re: M/s Vadilal Industries Ltd.

The AAAR Gujarat ruled that various varieties of parathas produced by the applicant do not qualify for classification under HSN Code 19059090 or the ... Classification of goods - Paratha' i.e. various varieties of Paratha produced by the applicant - merit classification under HSN Code 19059090 or not? - applicability of Sl.No. 99A of Schedule-l of Notification No. 01/2017-CT (Rate) and Notification No. 01/2017-IT (Rate) dated 28-6-17 - HELD THAT:- Parathas supplied by the appellant will not fall under the category of Roti or chappati and will not be classified under Chapter heading 1905 as contended by the appellant. The products supplied by the appellant are thus quite different from plain Roti or Chapatti and are therefore, not eligible for the concessional rate of 5% GST (applicable to Plain Chapatti or Roti), provided under SI.No.99A of Schedule I to Notification No. 1/2017-CT (Rate) dated 28.06.2017 as amended. The Parathas supplied by the appellant are different from Plain Roti or Chapatti and cannot be treated as or covered under the category of Plain Roti or Chapatti. Further the parathas supplied by the appellant will not fall under Chapter heading 1905. The appropriate classification of Parathas would be under Chapter heading 2106 as the subject Parathas require to be cooked before the same can be consumed. The Chapter heading 2106 covers food preparations not elsewhere specified or included and Parathas do not fall under any specific chapter head. Further as per Rule 3(c) of Rules of Interpretation, when goods cannot be classifiable under Rule 3(a) or 3(b) then they shall be classified under the heading which occurs last in numerical order among those which merit consideration. Thus, among the headings 1905 and 2106, latter occurs last in the numerical order and hence heading 2016 would be more appropriate and right classification of appellant's product, even from this consideration. The Parathas supplied by the appellant are different from Plain Chapatti or Roti and cannot be treated as or covered under the Category of Plain Chapatti or Roti and appropriate classification of Parathas would be under Chapter heading 2106. Issues Involved:1. Classification of the product 'Paratha' under HSN Code.2. Applicability of 5% GST on 'Paratha'.Detailed Analysis:1. Classification of the product 'Paratha' under HSN Code:The appellant, M/s Vadilal Industries Ltd, argued that their product 'Paratha' should be classified under HSN Code 19059090, which includes bread, pastry, cakes, biscuits, and other bakers' wares. They contended that the essential character of Paratha is similar to roti or chapatti, which falls under this heading, and thus should be classified accordingly.The Gujarat Authority for Advance Ruling (GAAR) observed that Parathas are not ready-to-eat products and require 3-4 minutes of cooking, unlike roti or chapattis. The GAAR noted that HSN 1905 covers prepared or cooked products, while Parathas require further cooking. Therefore, the GAAR classified Parathas under HSN 21069099, which covers food preparations not elsewhere specified or included.Upon appeal, the Appellate Authority upheld the GAAR's ruling, emphasizing that Parathas, which require cooking before consumption, do not merit classification under Heading 1905. The Authority noted that the ingredients and preparation method of Parathas differ significantly from plain roti or chapatti. Consequently, Parathas were appropriately classified under Heading 2106, which includes food preparations requiring further processing.2. Applicability of 5% GST on 'Paratha':The appellant sought to classify Parathas under Entry No. 99A of Schedule-I of Notification No. 01/2017-CT (Rate), which attracts a 5% GST rate. They argued that Parathas are akin to roti or chapatti, which fall under this entry and are subject to the concessional rate.The GAAR ruled that Entry No. 99A specifically mentions 'Khakhra, plain chapatti or roti,' which are ready-for-consumption goods, unlike Parathas that require further cooking. Therefore, the GAAR concluded that Parathas do not fall under this entry and are instead covered under Entry No. 453 of Schedule-III of Notification No. 01/2017-CT (Rate), attracting an 18% GST rate.The Appellate Authority agreed with the GAAR's interpretation, stating that Parathas, which require cooking, cannot be equated with ready-to-eat items like roti or chapatti. The Authority reiterated that Parathas should be classified under Heading 2106 and subjected to an 18% GST rate as per the applicable entries in the GST notifications.Conclusion:The appeal filed by M/s Vadilal Industries Ltd was rejected, and the Advance Ruling No. GUJ/GAAR/R/20/2021 dated 30.06.2021 of the Gujarat Authority for Advance Ruling was upheld. The product 'Paratha' was classified under HSN 21069099 and subjected to an 18% GST rate, as it requires further cooking before consumption and does not fall under the category of ready-to-eat items like roti or chapatti.