Malabar Parota to attract 5% GST and not 18%, rules Kerala HC
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Disposing a petition by Kochi-based Modern Food Enterprises, a single judge bench of Justice Dinesh Kumar Singh said if key inputs (cereals, flour, starch, etc) and preparations are somewhat similar for products, then exclusion of one product from the taxation point of view cannot be justified. The HSN in question is 1905 of chapter 19 which prescribes GST rate for pizza, bread, khakhra, plain chapati or roti. According to rate notification, these are exigible for 5 per cent GST or they can be exempted too.
“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.’
Commenting on the ruling Sandeep Sehgal, Partner with tax firm AKM Global, said that while the AAR initially held these items as taxable at 18 per cent, the High Court disagreed, pointing out that these products, akin to bakery goods, are more appropriately classified under Heading 1905, entitling them to a lower GST rate of 5 per cent. “This decision highlights the importance of accurate classification in tax matters, ensuring fair treatment for businesses and consumers alike. The ruling marks a victory for the petitioner in this case, and serves as a precedent for similar disputes in the future,” he said.
Earlier, when the company approached AAR for clarity on tax, it was told that its product would attract GST at 18 per cent. Also, the said products would not get exemption from GST as it is applicable only for the specific commodity ‘Bread (branded or otherwise)’. Aggrieved by this, the company moved AAAR.
After going through all the facts presented and arguments made, the appellate body was in view that contents of the subheading 1905 would cover products of bakery and all these items covered therein which are in ready-to-eat form. Whereas, whole wheat Malabar Parota or the Classic Malabar Parota manufactured by the petitioner is neither a bakery product nor ready for human consumption as it needs to be heated or further processed for human consumption. Accordingly, it held that the products are liable to be taxed at 18 per cent.
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