Appellate Body says Parota is only a Reheated Chapati, Ruling to Classify under Prepared Food in HS 2106 with 18% GST Quashed

Karnataka AAAR (Appellate Authority for Advance Ruling) has invalidated Advance Ruling on Parota with 18 per cent GST.

In May, AAR ordered on the application filed by ID Fresh Foods (supplier of Whole Wheat Parota and Malabar Parota) and said these food items will attract GST at the rate of 18 per cent. Aggrieved by the decision, the company moved to AAAR and sought a ruling on,

“whether the preparation of Whole Wheat Bread and Malabar Parota be classified under Chapter heading 1905, attracting GST at the rate of 5 per cent?”

After hearing arguments and going through the fact AAAR dismissed the appeal, but declared the order passed by AAR void ab initio as it “vitiated by the process of suppression of material facts.” (It did give a ruling on the question posed in the application since “the matter is pending in a proceeding under the act.”)

AAAR noted the fact that parota needs to be heated on a pan or tawa, before consumption, for improved taste and crispiness. In other words, the parotas are in ready-to-cook condition with 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 need to be refrigerated to retain its freshness for its stated shelf life of 7 days.

The applicant used October, 2017 notification where ‘Khakhra, plain chapati or roti’ were placed in 5 per cent GST category to push its case. However, AAR said that Parota is not covered under this category but in separate chapter heading (2106). This means it will attract GST at the rate of 18 per cent.

AAAR noted the submission made by the tax department that the advance ruling has been obtained by the suppression of the material facts and it is inclined to take cognizance of this ruling. “It is trite law that when one comes for the justice one should come with clean hands, This is not the case here, The Appellant is indeed guilty of having not revealed that the fact of an investigation pending against them by the DGGI, Chennai Zonal Unit on the issue of classification of Paota at the time of applying for an advance ruling.” AAAR said while declaring AAR ruling as invalid.

Keeping this in mind, it said the question of addressing GST rate does not arise.