Malabar Parota Attracts 5% GST and Not 18%, Rules Kerala HC

Moneylife Digital Team 20 April 2024

Economy & Nation

Holding that Classic Malabar Parota and Whole Wheat Malabar Parota are akin or similar to the products mentioned in chapter heading 19 (of goods and services tax-GST), and the ingredients used in and the process applied in their preparations are somewhat similar to the other products under the chapter, the Kerala High Court (HC) ruled that these two products attract a GST of 5% and not 18% as held by the advance ruling authority (AAR) and advance ruling appellate authority (AAAR). Both AAR and AAAR took the view that a parota is different from bread and, thus attracts higher GST.

In a recent order, the Kerala HC bench of justice Dinesh Kumar Singh says, "I am of the considered opinion that if the petitioner products are akin or similar to the products mentioned in harmonised system of nomenclature (HSN) code 1905 of Chapter 19 with heading 'preparations of cereals, flour, starch or milk; pastrycooks' products as the ingredients used and process applied in their preparations are somewhat similar to the products mentioned in Chapter heading HSN Code 1905, excluding the petitioner's products from Entry 99A of the rate notifications, which are almost similar to the three products mentioned in the said Entry, cannot be justified."

"I am of the view that petitioner's products are also eligible at the rate of 5% GST (2.5% central GST + 2.5% state GST) and not 18% as contended by the special government pleader and held by the AAR and AAAR," the bench says.

Kochi-based Modern Food Enterprises Pvt Ltd had filed the petition challenging advanced ruling orders passed by the AAR and AAAR.

Responding to Modern Food Enterprises’ request seeking the classification of its products and rate of GST on the understanding that these two products qualify as bread, the Kerala AAR classified Classic Malabar Parota and Whole Wheat Malabar Parota under chapter heading 2106 and taxable at 18% GST (9% CGST and 9% SGST) of schedule III of the rate notification.

Modern Food Enterprises filed an appeal before the AAAR contending that ingredients involved in and the process employed for preparing its two products would merit classification of these products under tariff item 1905 9090, bearing the description 'other'.

AAAR opinioned that contents of the subheading 1905 would cover products of the bakery and all these items covered, which are in ready-to-eat form. "Whereas, Whole Wheat Malabar Parota or Classic Malabar Parota manufactured by Modern Food Enterprises is neither a bakery product nor ready for human consumption as it needs to be heated or further processed for human consumption."

AAAR held that Whole Wheat Malabar Parota or Classic Malabar Parota are liable to be taxed to GST at the rate of 18% (9% CGST and 9% SGST).

Modern Food Enterprises approached the Kerala HC, challenging orders passed by the AAR and AAAR.

Justice Singh observed that there is no doubt in any manner that products of Modern Food Enterprises should fall within the HSN 1905, as these products are akin or similar to those mentioned in the said chapter heading 19. "The ingredients used in and the process applied in their preparations are somewhat similar to the other products, which are specifically mentioned there, the tax in the products of Modern Food Enterprises' at the rate of 18% would not be justified."

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