Vadilal Loses Case in AAR, Paratha is not Roti, 18% GST Applicable

· AAAR disregarded the ruling given by the Maharashtra AAR, which had held parathas to be eligible for the concessional tax rate. Both the Kerala and Gujarat AARs have distinguished parathas from rotis.

Ahmedabad-based Vadilal Industries, manufacturer and supplier of a wide range of ‘parathas’, has not succeeded in convincing the Appellate Authority for Advance Rulings (AAAR) that a paratha is nothing but unleavened Indian bread. Or that, as wheat flour is its primary ingredient, it bears a close resemblance to ‘roti’ and ‘chapatti’ and hence should be taxable at 5% GST rate.

The appellate authority upheld the ruling given to this company last year by the Gujarat bench of the Authority for Advance Rulings (AAR) that an 18% GST rate would apply to ready-to-cook, or frozen, parathas.

The AAAR observed that frozen parathas as manufactured by Vadilal Industries have a wheat flour composition in the 36-62% range, depending on the type of the paratha, which also has other ingredients like potato, radish and onion, in addition to water, vegetable oil, salt, etc.

Even the plain paratha, in addition to wheat flour & water, contains margarine, salt, emulsifying agents, vegetable oil & bread improver. A plain roti or chapatti contains only wheat flour & water and is consumed directly, whereas parathas require heating (cooking) before consumption.

KPMG India indirect tax partner Harpreet Singh said, “Classification of products under GST requires looking into various aspects.”

In this case, the AAAR disregarded the ruling given by the Maharashtra AAR, which had held parathas to be eligible for the concessional tax rate. Both the Kerala and Gujarat AARs have distinguished parathas from rotis.

Of course, if you are dining out in a standalone restaurant, the GST levied on your food bill is 5%.

Complex classification norms and multiplicity of slabs often lead to an endless bout of litigation and advance rulings, which at times differ from state to state, and not help set the matter at rest. At least till the GST Central Council steps in, which is followed by a notification specifying the rate or clarifying the issue. However, the GST Council has little authority.