TaxTMI 
TaxTMI 
2026 (8) TMI 624
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....at provides crispness, puffing, and extended shelf life to papad and similar food products; that the product contains no artificial additives, preservatives, or harmful chemicals and is consumed as part of traditional Indian cuisine; that currently, the applicant has been classifying Papad Khar under HSN Code 2836 (Food Additives/Preparations) with 18% GST rate. 3. The applicant has further submitted that based on the detailed product analysis and technical opinion, Papad Khar should be correctly classified under either HSN Code 2501 (Common Salts - Natural/Rock Salt) @ 5% GST, OR HSN Code 2102 (Prepared Food Additives/Condiments) @ 5% GST; that they seek advance ruling on the correct classification and applicable GST rate, which would result in significant reduction from the currently applied 18% rate and that they contest the current HSN 2836 classification @ 18% GST and seek binding clarification that the product should be taxed at 5% (not 18%) under the correct HSN code. 4. The applicant has submitted the complete manufacturing process (stage-wise) for papad khar production, from initial preparation through final packaging as under: i. Water Preparation: Water is....
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....sium Carbonate (K2CO3) 0-10% Regional variations Moisture <2% --- B. Physical Specifications: Parameter Specifications Appearance White crystalline powder Particle size 100-200 mesh Bulk density 0.8 -1.2 g/cm3 pH (1% solution) 8.3 - 9.5 (Strongly alkaline) Solubility Freely soluble in water Purity 98% minimum (Food grade) 5. The applicant has asked the following questions for Advance Ruling: 1) Whether Papad Khar should be classified under HSN Code 2501 (Common Salts) @ 5% GST based on its alkaline salt composition and food application; OR 2) Whether Papad Khar should be classified under HSN Code 2102 (Prepared Food Additives/Condiments) @ 5% GST based on its nature as a food processing ingredient; OR 3) Whether Papad Khar qualifies for GST exemption under: Notification No. 2/2017-Central Tax (Rate), Entry 96 (Papad and related food items); OR Entry 23 (Unpacked food items and basic food ingredients); OR Any other applicable exemption notification; 4) If the product is incorrectly classified under HSN 2836@, 18% GST, what is the correct classification and what relief/refun....
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....a basic food ingredient. No reasonable interpretation of HSN 2836 includes food additives or edible salts • Alternative correct classification - HSN 2501 (5% GST) - Papad Khar is a naturally occurring or manufactured alkaline salt (sodium sesquicarbonate or potassium carbonate compound) & falls within HSN Chapter 25 (Salt; Sulphur; Earths and Stone; Plastering Materials, Lime and Cement); This is the primary and correct classification based on product composition as HSN 2501 covers "Common Salts (Rock Salt, Sea Salt, Refined Salt)" at 5% GST. • Alternative Correct Classification - If considered as a prepared food additive rather than raw salt, HSN 2102 (Prepared Food Additives/Condiments/Seasoning Preparations) applies. HSN 2102 specifically covers food preparation ingredients and condiments at 5% GST. This classification is also more appropriate than HSN 2836. • Current 18% GST rate (HSN 2836) on Papad Khar creates excessive tax burden on papad manufacturers. Input Tax Credit denial for papad (exempt item), forces manufacturers to absorb 18% cost. It also indicates non-compliance with GST classification principles. • HSN 2836 (Ex....
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....nder HSN Code 2836 with 18% GST rate; that based on the detailed product analysis and technical opinion, Papad Khar should be correctly classified under either HSN Code 2501 (Common Salts - Natural/Rock Salt) @ 5% GST, OR HSN Code 2102 (Prepared Food Additives/Condiments) @ 5% GST. The applicant has also given the complete manufacturing process (stage-wise) for papad khar production, from initial preparation through final packaging as detailed in para-4 above. 11. Further, the applicant has submitted that multiple Advance Rulings (including Gujarat AAR/AAAR decisions) have confirmed that papad, irrespective of shape, size, or form, is exempt from GST and following the principle established in GST jurisprudence, papad khar, which is an essential ingredient in its manufacture, should logically qualify for similar treatment and be exempted; that Notification No. 02/2017-CT (Entry 23) provides exemption for cereals and millets (unpacked); pulses (unpacked), spices (unpacked), oil seeds & essential food ingredients and papad khar, when supplied in unpacked or basic form for food preparation, qualifies as an essential food ingredient similar to spices and condiments, which are traditi....
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....TURED SALT) AND PURE SODIUM CHLORIDE, WHETHER OR NOT IN AQUEOUS SOLUTION OR CONTAINING ADDED ANTI-CAKING OR FREE FLOWING AGENTS; SEA WATER 2501 00 - Salt (including table salt and denatured salt) and pure sodium chloride, whether or not in aqueous solution or containing added anticaking or free flowing agents; Sea water 2501 00 10 --- :Common salt (including iodised salt) 2501 00 20 --- Rock salt 2501 00 90 --- Other HSN NOTES TO HEADING 2501: 25.01 - Salt (including table salt and denatured salt) and pure sodium chloride, whether or not in aqueous solution or containing added anti-caking or free-flowing agents; sea water. This heading relates to sodium chloride, commonly known as salt. Salt is used for culinary purposes (cooking salt, table salt), but it also has many other uses and, if necessary, may be denatured to render it unfit for human consumption. The heading includes: (A) Salt which is extracted from underground: either by conventional mining (rock salt), or by solution mining (water is injected under pressure into a layer of salt and returns to the surface as saturated brine). (B) E....
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....d baking powders HSN NOTES TO HEADING 2102: 21.02- Yeasts (active or inactive); other single-cell micro-organisms, dead (but not (including vaccines of heading 30.02); prepared baking powders. 2102.10 - Active yeasts 2102.20 -Inactive yeasts; other single-cell micro-organisms, dead 2102.30 -Prepared baking powders (A) YEASTS: The yeasts of this heading may be in the active or inactive state. Active yeasts generally provoke fermentation. They consist essentially of certain micro-organisms (almost exclusively of the genus Saccharomyces), which multiply during alcoholic fermentation. Yeasts may also be produced by partial or total prevention of felmentation, according to the aeration process. The active yeasts include: (1) Brewery yeast. This forms in beer fermentation vats. It is presented as a yellowish-brown paste or solid generally with the bitter flavour of hops and the odour of beer. (2) Distillery yeast. This is produced during the fermentation, of, e.g., grain, potatoes or fruit, in distilleries. It is a firm cream-coloured paste varying in odour according to the product used in the disti....
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....and anti-oxidants. Such products remain classified here provided that the addition of such ingredients does not alter their character as micro-organisms, (C) PREPARED BAKING POWDERS The "prepared baking powders" classified in this heading consist of mixtures of chemical products (e.g., sodium bicarbonate, tartaric acid, ammonium carbonate, phosphates), with or without added starch. Under suitable conditions they evolve carbon dioxide and are therefore used in baking for leavening dough. They are usually sold in retail packings (sachets, tins, etc.) under various names (baking powder, Alsatian leaven, etc.). The heading excludes, inter alia : (a) Self-raising cereal flour, e.g., flour to which baking powder has been added (heading 11.01 or 11.02). (b) Autolysed yeast (heading 21.06). (c) Cultures of micro-organisms (other than yeasts) and vaccines (heading 30.02). (d) Medicaments of heading 30.03 or 30.04. (e) Enzymes (amylases, pepsin, rennet, etc.) (heading 35.07). 13. We find that tariff heading 2501 covers three sub-headings i.e. Common Salt (HSN code - 25010010), Rock Salt (Sub-heading: 25010020) & others (25010090). We a....
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....g iodised OR phosphated OR denatured by any process OR being obtained as a by-product of the treatment of ores. We also do not find any evidence whatsoever, of any electrolysis taking place OR the addition of any anti-caking or free-flowing agents in the said product. From the above, it is very much obvious that the applicant's product does not fall under sub-heading 25010090 (others). Further, in view of the above discussion, it can be safely assumed that the product of the applicant does not fall within the ambit of heading 2501. 15. We find that heading 2102 (which has been suggested as an alternative tariff heading for their product by the applicant) covers Active yeasts (sub-heading 210210), Inactive yeasts (sub-heading 210220) & prepared baking powders (sub- heading 210230). However, since the applicant has not clarified as to whether their product is covered under 'yeast' or 'baking powder', it becomes obligatory for us to examine the issue. We find that while papad khar (also known as sajji khar) of the applicant is an alkaline salt powder constituted of sodium chloride, sodium carbonate and sodium bicarbonate which acts as a raising agent and alkalizing compound that pr....
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....clude that 'papad khar' is completely different from 'baking powder' and does not have the characteristics of baking powder. The above detailed discussion also leads to the conclusion that 'papad khar' does not fall within the ambit of heading 2102. 16. The applicant has submitted that they are presently classifying their product 'papad khar' under heading 2836. We therefore need to refer to the Chapter Notes of Chapter 28, tariff heading 2836 as well HSN notes of heading 2836 in order to explore whether the product of the applicant falls under the said heading or otherwise. The same are reproduced hereunder: Relevant portions of Chapter Notes of Chapter 28 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975): CHAPTER 28 Inorganic chemicals, organic or inorganic compounds of precious metals, of rare-earth metals, of radioactive elements or of isotopes NOTES : 1. Except where the context otherwise requires, the headings of this Chapter apply only to: (a) separate chemical elements and separate chemically defined compounds, whether or not containing impurities; (b) the products mentioned in (a) above dissolved in wat....
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.... of a kind used as luminophores, of heading 3206; glass frit and other glass in the form of powder, granules or flakes, of heading 3207; (e) artificial graphite (heading 3801); products put up as charges for fire extinguishers or put up in fire-extinguishing grenades, of heading 3813; ink removers put up in packings for retail sale, of heading 3824; cultured crystals (other than optical elements) weighing not less than 2.5 g each, of the halides of the alkali or alkaline-earth metals, of heading 3824; (f) precious or semi-precious stones (natural, synthetic or reconstructed) or dust or powder of such stones (headings 7102 to 7105), or precious metals or precious metal alloys of Chapter 71; (g) the metals, whether or not pure, metal alloys or cermets, including sintered metal carbides (metal carbides sintered with a metal), of Section XV; or (h) optical elements, for example, of the halides of the alkali or alkaline-earth metals (heading 9001). 4. ------- 5. Headings 2826 to 2842 apply only to metal or ammonium salts or peroxysalts. Except where the context otherwise requires, double or complex salts are to be classified in headi....
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.... decomposing by heating the resulting acid sodium carbonate. Occurs as an anhydrous (or dehydrated) powder, or in hydrated crystals (soda crystals, washing soda) with 10 H,O, efflorescing in the air to give a monohydrate (with I H,O). Used in numerous industries : as a flux in glass-making and in ceramics; in the textile industry; in the manufacture of washing preparations; in dyeing; in the tin-sizing of silk (with stannic chloride); as an anti- scaling product (see Explanatory Note to heading 38.24); in the preparation of sodium hydroxide, sodium salts and indigo; in the metallurgy of tungsten, bismuth antimony or vanadium; in photography; for purifying industrial water (lime soda process) and, mixed with lime, for purifying coal gas. (b) Sodium hydrogen carbonate (acid carbonate, sodium bicarbonate) (NaHCO3). Usually a crystalline powder or white Crystals, soluble in water, especially when hot, and liable to deteriorate in a humid atmosphere. Used in medicine (for treating gravel); for manufacturing digestive tablets and aerated beverages; in the preparation of baking powders; in the porcelain industry, etc. Natural sodium carbonate (natron, etc.) is excluded (....
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.... above, 17.1 As per data available online, Papad khar (also known as saji khar or papad kharo) is a traditional alkaline salt. Chemically, it is a (2:1) mixture of sodium carbonate ((Na2CO3) and sodium bicarbonate ((NaHCO3). Sodium Carbonate, often known as washing soda or soda ash, is the main alkaline agent that gives the dough its elasticity and crispiness whereas Sodium Bicarbonate, commonly known as baking soda, acts as a leavening agent that releases gas to expand the papad when fried. Papad Khar is often sold and referred to as sodium sesquicarbonate and is primarily used in Indian cuisine to give crispiness, volume, and an extended shelf life to papads and other crispy snacks and acts as a dough conditioner, helping the papad puff up beautifully when fried or roasted. Further, if you are cooking and need to substitute papad khar, the closest and most accessible alternative is baking soda. As per data available online, baking soda, chemically known as sodium bicarbonate (or bicarbonate of soda), is a natural, alkaline white powder which acts as a leavening agent in cooking, reacting with acids to produce carbon dioxide bubbles that cause doughs and batters to rise. It als....
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....GST at the rate 18% (9% CGST + 9% SGST). 19. The applicant is found to have contended that multiple Advance Rulings (including Gujarat AAR /AAAR decisions) have confirmed that papad, irrespective of shape, size, or form, is exempt from GST and following the principle established in GST jurisprudence, papad khar, which is an essential ingredient in its manufacture, should logically qualify for similar treatment and be exempted. In this regard, we do not find any such established principle in GST jurisprudence which suggests that raw materials used in the manufacture of the finished product should be exempt from GST when the finished product is exempt from GST. GST classification principles do not automatically indicate that raw materials should be charged at NIL rate of GST simply because the final product is exempt. GST is a value-added tax, and tax rates for inputs and final products are decided independently by the Government based on economic policies and the recommendations of the GST Council. A raw material and its final product are separate items with their own specific HSN codes and the rate for each is determined strictly by its specific tariff entry in the rate schedule....