Third-time lucky! This aptly describes the victory in the arena of Goods and Services Tax (GST) by ‘Parota’ manufacturer and supplier, Modern Food Enterprises. After unsuccessful rulings given by the Authority for Advance Rulings, and later its Appellate Bench, the Kerala high court finally held that Malabar ‘Parota’ is akin to bread, as it has the same ingredients and should be subject to 5% GST and not 18% as was held by the other quasi-judicial forums.
Tax experts state that advance rulings are binding on the parties with respect to the transaction on which the ruling is sought. However, they do have a persuasive impact in assessment of similar cases. A high court order, on the other hand, sets judicial precedent. Fear of litigation may however keep manufacturers in other states from following this high court ruling.
Modern Food contended that if products covered under ‘Heading 1905’ – which include bread, pastry, cakes, biscuits…are examined, it is evident that their parota have almost the same/similar ingredients.
It added that: Parotas are semi-cooked for marketing purposes to retain the optimal shelf-life and moisture, so that upon pre-heating, they remain soft and taste good. Like pizza base or pappad these products are classifiable under ‘Heading 1905’ and not ‘Entry 2106’ (which covers residual food preparations) as was held in the advance rulings.Justice Dinesh Kumar Singh, in his order delivered earlier this month, agreed with this submission.
In Sept 2021, the Gujarat Bench of the AAR had held that frozen parathas are not rotis and subjected Vadilal Industries to a GST of 18%. Earlier in July 2020, a similar stand had been taken by the Karnataka bench of the AAR, in the case of ID Fresh Food. Both these rulings were covered by TOI.
Complex classification norms and multiplicity of slabs often lead to an endless bout of litigation. Advance rulings, which at times differ from state to state, often do not help set the matter at rest, till the GST Central Council steps in, which is followed by a notification specifying the rate or clarifying the issue. Merging some slabs could be one of the first steps towards simplicity, says an industry expert.
Tax experts state that advance rulings are binding on the parties with respect to the transaction on which the ruling is sought. However, they do have a persuasive impact in assessment of similar cases. A high court order, on the other hand, sets judicial precedent. Fear of litigation may however keep manufacturers in other states from following this high court ruling.
Modern Food contended that if products covered under ‘Heading 1905’ – which include bread, pastry, cakes, biscuits…are examined, it is evident that their parota have almost the same/similar ingredients.
It added that: Parotas are semi-cooked for marketing purposes to retain the optimal shelf-life and moisture, so that upon pre-heating, they remain soft and taste good. Like pizza base or pappad these products are classifiable under ‘Heading 1905’ and not ‘Entry 2106’ (which covers residual food preparations) as was held in the advance rulings.Justice Dinesh Kumar Singh, in his order delivered earlier this month, agreed with this submission.
In Sept 2021, the Gujarat Bench of the AAR had held that frozen parathas are not rotis and subjected Vadilal Industries to a GST of 18%. Earlier in July 2020, a similar stand had been taken by the Karnataka bench of the AAR, in the case of ID Fresh Food. Both these rulings were covered by TOI.
Complex classification norms and multiplicity of slabs often lead to an endless bout of litigation. Advance rulings, which at times differ from state to state, often do not help set the matter at rest, till the GST Central Council steps in, which is followed by a notification specifying the rate or clarifying the issue. Merging some slabs could be one of the first steps towards simplicity, says an industry expert.