Classification of semi cooked parota products under HSN determined akin to bread, resulting in GST rate reduced to 5% from 18%.

The primary dispute concerned classification of semi cooked parota products under the HSN and the consequent GST rate and exemption eligibility. Applying the General Rules for Interpretation and the 'most akin' principle, the court found the products comparable to items under HSN 1905 because they are cereal based and akin to ready to eat bakery items despite requiring reheating; therefore they were classified under HSN 1905. As a result, the products qualify for the lower rate prescribed for that heading and are eligible for the specified reduced GST rate of 5%, overturning the appellate authority's 18% classification.

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Issues Involved:
1. Classification of the petitioner's products under the HSN code.
2. Eligibility for exemption from GST under Entry 97 of Notification No. 2/2017-Central Tax (Rate).
3. Applicable GST rate for the petitioner's products.

Summary:

Issue 1: Classification of the Petitioner's Products
The petitioner, a dealer under the CGST/SGST Act, 2017, challenged the appellate authority's order classifying its products, Classic Malabar Parota and Whole Wheat Malabar Parota, under Chapter Heading 2106, thereby attracting 18% GST. The petitioner argued that these products should be classified under Tariff item 1905 9090 as 'bread' under Heading 1905, which would attract a lower GST rate.

The appellate authority determined that the products did not qualify as 'bread' under HSN 1905 because they are not bakery products nor ready for human consumption without further heating or processing. The authority classified the products under Entry 2106 90, making them liable for 18% GST.

Issue 2: Eligibility for Exemption from GST
The petitioner sought exemption under Entry 97 of Notification No. 2/2017-Central Tax (Rate), which exempts 'Bread (branded or otherwise)' from GST. The appellate authority rejected this, stating that the products do not qualify as 'bread' under HSN 1905, and thus, are not eligible for exemption.

Issue 3: Applicable GST Rate
The petitioner contended that its products should attract a standard GST rate of 5% under Entry 99A of Notification No. 1/2017-Central Tax (Rate) for goods classified under HSN 1905 or 2106. The appellate authority, however, held that the products fall under HSN 2106 and are subject to 18% GST.

Analysis:
The court considered whether the petitioner's products should be classified under Chapter Heading 1905 or 2106. It noted that Chapter Heading 1905 covers products made from cereals, starch, milk, and pastry cooked products, which are generally ready-to-eat. The court applied Rule 4 of the General Rules for Interpretation (GRI), which states that goods should be classified under the heading to which they are most akin.

The court found that the petitioner's products, being semi-cooked and requiring heating, are more akin to the products under Chapter Heading 1905. Therefore, the products should be classified under HSN 1905.

Conclusion:
The court concluded that the petitioner's products are akin to those under HSN 1905 and should be classified accordingly. Consequently, the products are eligible for a GST rate of 5% (2.5% CGST + 2.5% SGST) as per Entry 99A of the Rate Notification, rather than 18% as held by the appellate authority.

The writ petition was partly allowed, and it was held that the petitioner's products are liable to be taxed at 5% GST.

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