Kerala High Court stays judgment which held that Malabar Parota attracts 5% GST, not 18%

The Kerala High Court on Tuesday stayed a recent judgment of a single-judge which held that Malabar parota will attract Goods and Services Tax (GST) at 5 percent and not 18 percent [State of Kerala v. Modern Food Enterprises Private Limited]..A division bench of Justices A Muhamed Mustaque and S Manu stayed the operation of the judgment for a period of two months..The stay order was passed on an appeal moved by the State government challenging the judgment passed by a single-judge in April this year .By way of background, Modern Enterprises Pvt. Ltd. had filed a petition before the High Court challenging an order of the the Appellate Authority for Advanced Ruling which held that its products, classic Malabar Parota and whole wheat Malabar Parota, are taxable at 18% GST as per the Rate Notifications issued by the Central/State Goods and Service Tax Act, 2017.Modern Food argued that its products would fall under Tariff item No.1905 9090 of the First Schedule to Customs Tariff Act, 1975, as Indian flat breads are covered by the expression ‘bread’ under Heading 1905.Their main argument was that the ingredients used and the process involved in making the parotas are similar to these products and therefore, would fall in this category.The government pleader opposed this claim, arguing that the ingredients and process are different and that no one mistakes parota for bread or vice versa.After considering rival submissions, the single-judge held that Malabar Parota comes within HSN 1905 since the ingredients and preparation of parotas are similar to that of products that are taxable only at 5% GST."I am of the considered opinion that if the petitioner products are akin / similar to the products mentioned in 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. In view of the aforesaid discussion, I am of the view that petitioner's products are also exigible at the rate of 5% GST (2.5 % CGST + 2.5 % SGST) and not 18% as contended by the learned Special Government Pleader and held by the Advance Ruling Authority and Advance Ruling Appellate Authority," the single-judge's judgment stated. The State appealed to the division bench against the same. The division bench on June 18 stayed the single-judge decision for two months..The State government's appeal is likely to be heard next before the stay period of two months lapses..[Read Order]