The Kerala High Court ruled the delectable Malabar Parota will taste better than the popular flatbread and will draw a 5% GST rather than 18%. Through this, the court has turned down orders by the State’s Authority of Advance Ruling (AAR) and Appellate Authority for Advance Ruling (AAAR).
A single judge bench of Justice Dinesh Kumar Singh disposed of a petition of Kochi-based Modern Food Enterprises and expressed that if key inputs (cereals, flour, starch, etc) and preparations are similar for products, then on one product taxation should take place. The HSN in question is 1905 of chapter 19 which defines the Goods and Services Tax (GST) rate for pizza, bread, khakhra, plain chapati, or roti. As per the notification of the rate, these are liable for a 5% GST or they can also get waived.
“I am of the view that petitioner’s products are also exigible at the rate of 5 per cent GST (2.5 per cent CGST + 2.5 per cent SGST) and not 18 per cent,” the bench said in a recent ruling. The company is engaged in the manufacture and supply of ‘Classic Malabar Parota’ and ‘Whole Wheat Malabar Parota.’
On the ruling the expert mentioned that while the AAR ruled that such items are levied to tax with 18%, the High Court does not regard it specifying that such products are similar to the bakery goods and are more precisely sorted under Heading 1905, entitling them to a lower GST rate of 5 per cent. “The same decision outlines the importance of accurate classification in tax cases, ensuring fair treatment for businesses and consumers alike. The same ruling marks a success for the applicant in this case, and serves as a precedent for identical conflicts subsequently,” he added.
Before that when the company approached the Authority for Advance Ruling (AAR) for tax transparency, it specified that its product shall draw an 18% GST. The stated products shall not waived from the GST since the same is applied just for the particular commodity ‘Bread (branded or otherwise)’. Aggrieved by this, the company moved AAAR.
The appellate body has the opinion post analyzing, the contents of the subheading 1905 shall cover products of the bakery and all such items covered therein which are in ready-to-eat form.
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Whereas, whole wheat Malabar Parota or the Classic Malabar Parota manufactured by the applicant is neither a bakery product nor ready for human consumption as it ought to be heated or further processed for human consumption. Therefore, it ruled that the products should be taxed at 18%.
| Case Title | Modern Food Enterprises Private Limited Vs Union of India |
| Citation | WP(C) NO. 13935 OF 2021 |
| Date | 02.04.2024 |
| Kerala High Court | Read Order |
