ROTI OR PARATHA: Massive Hit On Taxability Or Pocket?

Nothing goes without saying, the recent AAR ruling made not only the businessman but also to the consumers to think what to prefer whether to go by choice to eat or by the price to afford? Indians love Parathas and their staple food is roti (chapati). When going to restaurants the most common thing to order is roti or paratha. Wait but this can’t be done anymore. It’s not like there is a ban on either of them, but your bill will be different because there are different GST rates on both items despite of having same ingredients.

Unbelievably, a recent ruling of Karnataka Authority for Advance Ruling (AAR) on the application of ID foods made an order by recognising that the “Rotis” and “parothas” or “Parathas” are not one and the same thing to be in the same category and thus where on roti it is 5% GST, Parathas will be under 18% category.

CONTRARY RULINGS OF DIFFERENT AAR

01. KARNATAKA AUTHORITY FOR ADVANCE RULING AAR no. KAR ADRG 38/2020 dated 22.05.2020 with reference to the Notification No.1/2017 – Central Tax (Rate) dated 28.09.2017, specifically to explanation (iii) and (iv) amended with notification 34/2017, held that impugned product “paratha” does not have any specific entry in the Customs Tariff Act, 1985/ GST Tariff. The products covered under 1905 are already prepared or completely cooked products and no further process is required to be done on them for consumption and hence they are ready to use prepared foods. In the instant case, the impugned product is not ready for consumption but needs to be heated for consumption. As per chapter 21 (Miscellaneous Edible Preparations), AAR held that impugned product does not merit classification under heading 1905. Now, this item will be in classification 2160 90 and thus 18% GST will be applicable now.

02. Classification of Unleavened flat breads- Khakhra, plain chapatti,roti, paratha, paratha rolls and roti rolls, Leavened flat breads- Naan, kulcha, chalupa and pita bread, Corn chips, Corn Taco, Corn Taco strips, Pan cake, Pizza bread. HELD Unleavened Flatbreads such as plain chapatti, Tortilla, Tortilla Wraps, roti, Roti rolls, Wraps, Paratha, Paratha wraps liable to tax @ 5% HELD Leavened Flatbreads such as Naan, Kulcha, Chalupa, Corn Chips, Corn Taco, Corn Taco Strips, Pancakes, Pizza Bread liable for taxes @ 18 % HELD Pita Bread is Exempt Advance Ruling NO.GST-ARA-26/2018-19/B-91, Dated 20th August, 2018. MAHARASHTRA AUTHORITY FOR ADVANCE RULING (constituted under section 96 of the Maharashtra Goods and Services Tax Act, 2017).

Without prejudice to the above like facts and circumstances of the case on the face of the record, it is a settled position under common law that in the absence of a statutory definition, a word is to be interpreted by understanding its meaning under the common parlance. This position has been upheld by the Hon’ble Supreme Court in the case of M/s. United Offset Process Pvt. Ltd. V ACC, Bombay & Ors. [1989 Supp.(1) SCC 131).

The Apex Court commented: If there is no meaning attributed to the expressions used in the particular enacted statute then the items in the customs entries should be judged and analysed on the basis of how these expressions are used in the trade or industry or in the market or, in other words, how these are dealt with by the people who deal in them, provided that there is a market for these types of goods. This principle is well known as classification on the basis of trade parlance. This is an accepted form of construction. It is a well-known principle that if the definition of a particular expression is not given, it must be understood in its popular or common sense viz. in the sense how that expression is used everyday by those who use or deal with those goods.

CONCLUSION

After the Karnataka AAR ruling, the twitter and other social media accounts, overabundance got filled with people questioned the idea of bureaucrats, how they came up with this distinction. The significant question here is, that ruling held that Parathas needs to be cooked again and thus attract higher GST, but when a person go to a restaurant where the both rotis and parathas being cooked at the same time, the question of another heating does not arise and consequently, the said ruling is in totality without merits and is arbitrary to the acceptance. However, this ruling has made the assessee to re-think on the differentiation created by them between Roti and Paratha.

Disclaimer- Views expressed only.

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