ID Fresh Foods, a brand selling idli/dosa batter and ready-made parotta, in October 2019 had approached the Authority for Advance Ruling (AAR) in Karnataka to seek clarity on whether the preparation of whole wheat parotta and Malabar parotta should be classified under Chapter 1905, attracting a Goods & Services Tax (GST) of 5 percent.
The Karnataka bench of AAR in its ruling, differentiated between khakhra, plain chapati or roti and the parotta, and observed that ready-to-eat parotta needs additional processing by way of heating for consumption, and hence liable for 18 percent GST.
The bench ruled that the parotta needs to be charged under heading 2106 instead of the heading 1905, since it is not covered by any other heading under HSN (Harmonised Commodity Description and Coding System) and also needs more processing.
Heading 1905 covers foods like cakes, pastry and such foods that are completely cooked and are ready for consumption.
“The products khakhra, plain chapatti and roti are completely cooked preparations, do not require any processing for human consumption and hence are ready to eat food preparations, whereas the impugned product (whole wheat parottas and Malabar parottas) are not only different from the said khakhras, plain chapatti or roti but also are not like products in common parlance as well as in the respect of essential nature of the product. These products also require further processing for human consumption,” the AAR said.
Experts told Moneycontrol that multiple slabs lead to classification confusion. But according to the government, one single classification doesn't exist anywhere. A lot of items like milk are tax free, but once packaged and sold in tetrapacks attract a GST of 5 percent. Similarly with parotta, it is packaged and sold at a higher price and isn't even a staple, an official explained.
Essential food that is unprocessed do not attract any GST. However, processed foods attract higher rates of 5 percent, 12 percent, or 18 percent depending on the nature of the food product. A pizza bread attracts 5 percent tax, though bread (branded or otherwise) is charged zero GST.
Under HSN, heading 1905 classifies pizza bread, khakhra, plain chapati or roti, rusks, toasted bread in one category, to be taxed at 5 percent GST. In the ready-to-eat category, certain unbranded edibles attract 5 percent GST, while branded ones are taxed at 12 percent.
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