Why Higher GST On Parota Than Roti – Free PDF Download

What is HSN Code?

• HSN stands for Harmonized System of Nomenclature which was developed by the World Customs Organization (WCO)
• With the vision of classifying goods all over the World in a systematic manner.
• HSN contains six digit uniform code that classifies 5,000+ products and which is accepted worldwide.

• India has already been using HSN system in the Central Excise and Customs regime.
• But after implementation of GST it applicable on almost all the goods and services.
• It is a much more detailed classification that added another two digits to the 6-digit structure.

What is the current case?

• Bengaluru-based ID Fresh Foods, which is a food products company involved in preparation and supply of ready-to-cook items like idli and dosa batter, parota and chapatis.
• It had approached the Authority of Advance Ruling (AAR) regarding whether preparation of whole wheat parota and Malabar parota can be classified under Chapter 1905 attracting 5% GST.

Classification of food items under GST

• Most food items, especially those of essential and unprocessed nature, are charged nil GST.
• But processed foods attract higher rates of 5%, 12%, or 18% depending on the food product.
• For instance, pappad, bread (branded or otherwise), are charged zero GST, but pizza bread is charged 5% GST.
• Heading 1905 under the Harmonised Commodity Description and Coding System classifies pizza bread, khakhra, plain chapati or roti, rusks, toasted bread in one category, for which a 5% GST rate is levied.

The ruling

• The Karnataka bench of AAR was of the view that the parota is not covered by any other heading under the HSN system.
• Since it needs to be processed for human consumption, so it needs to be charged under heading 2106, and not heading 1905.
• “The products khakhra, plain chapatti and roti are completely cooked preparations, do not require any processing for human consumption.”
• But remember, parota served in a restaurant or provided in takeaway attract 5% GST only.
• “Even items like cheaper biscuits, pastries, cakes, etc., also attract GST at the rate of 18%.
• Frozen food would be more comparable to such item.
• Frozen foods cannot be comparable to plain roti or plain parota served in restaurants or taken as staple food, or eaten by poor on day-to-day basis,” the finance ministry official said.
• “Even items like cheaper biscuits, pastries, cakes, etc., also attract GST at the rate of 18%.
• Frozen food would be more comparable to such item.
• Frozen foods cannot be comparable to plain roti or plain parota served in restaurants or taken as staple food, or eaten by poor on day-to-day basis,” the finance ministry official said.
• Products such as milk is tax-free,
• But milk in tetrapack is taxed at 5%
• Condensed milk is taxed at 12%.

Conclusion

• While tax analysts say that less number of slabs and uniform rates might help in reducing such classification disputes.
• Government officials say this is a standard practice of classifying products differently and it exists in other countries as well.

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