We all must be aware of the famous ruling of Karnataka AAR wherein it had adjudged that parota must be taxed at more than triple the GST tax rate on roti. The AAR in this case had held that whole wheat parota and Malabar parota with a shelf life of three-five days are not ready-to-eat as they need to be heated before they are consumed, which puts it into the category of products that are taxed at 18 %.
Against the above ruling of AAR, the firm M/s ID Fresh Food (India) Pvt. Ltd had filed appeal before the Karnataka Appellate Authority of Advance Ruling (AAAR) which has set aside the order of Authority of Advance Ruling (AAR) ruling that 18% GST is applicable on Whole Wheat Parota and Malabar Parota, stating the order to be void ab initio on the grounds that it was vitiated by the process of suppression of material facts.
However, the AAAR did not give any ruling on classification of parota since the matter is pending in the proceedings.
Facts of the case:
The Applicant, ID Fresh Food (India) Pvt. Ltd is a food products company involved in the preparation and supply of a wide range of ready to cook, fresh foods including idli & dosa batter, Parotas, Chapatis, curd, paneer, whole wheat paratha, and Malabar Parota. The Appellant manufactures Parotas using natural ingredients.
The Parotas need to be heated on a pan or Tawa, before consumption, for improved taste and crispiness. In summary, the Parota is in ready to cook conditions. The Parotas have a shelf life ranging from 3-7 days.
The Malabar Parotas can be stored in a cool and dry place and have a shelf life of up to 4 days. The wheat parotas are recommended to be refrigerated for retaining the freshness up to 7 days. These products are not frozen products but only needs to be refrigerated to retain its freshness for its stated shelf life of 7 days.
Issues on which ruling was sought from AAR:
The Appellant approached the AAR seeking a ruling on the issue of whether the preparation of Whole Wheat paratha and Malabar parotta be classified under Chapter heading 1905, attracting GST at the rate of 5%.
Ruling of AAR:
The AAR vide its order ruled that the product parota is classified under Chapter Heading 2106 and is not covered entry No. 994 of Schedule I to the Notification No.1/2017-Central Tax (Rate) dated June 28, 2017, as amended vide Notification No.34/2017-Central Tax (Rate) dated October 13, 2017. so 18% of GST is applicable.
The Appellant filed appeal before AAAR against the above order of AAR.
Order of AAAR: Ruling
- It is trite law that when one comes for justice one should come with clean hands. This is not the case here . The Appellant is indeed guilty of having not revealed the fact of an investigation pending against them by DGGI, Chennai Zonal Unit on the issue of classification of Parota at the time of applying for an advance ruling. We , therefore invoke the provisions of Section 104 of the CGST Act and declared the advance ruling dated 22nd May,2020 as void ab initio.
- Having held the order of the lower Authority is void ab initio , the question of addressing “Whether the preparation of Whole Wheat parota and Malabar parota be classified under Chapter heading 1905 , attracting GST at the rate of 5% does not arise”.
In light of above, the appellate authority consisting of Judicial Member, D.P. Nagendra Kumar and Accountant Member, M.S. Srikar ruled that the ruling given by AAR wherein 18% GST applicable on Whole Wheat Parota and Malabar Parota is void ab initio on the grounds that it was vitiated by the process of suppression of material facts.
However, the AAAR did not give any ruling on the issue whether the preparation of Whole Wheat paratha and Malabar parotta be classified under Chapter heading 1905, attracting GST at the rate of 5% since the matter is pending in the proceedings.
READ / DOWNLOAD ORDER:
***
[rainbow]Don’t miss the next GST Update / Article / Judicial pronouncement[/rainbow]
Subscribe to our newsletter from FREE to stay updated on GST Law
Resolve your GST queries from national level experts on GST free of cost.
Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
