Malabar parota attracts 5% GST, not 18%: Kerala High Court

The Kerala High Court recently held that Malabar parota will attract Goods and Services Tax (GST) GST at 5 percent and not 18 percent [Modern Food Enterprises Private Limited v. Union of India & Ors.].Justice Dinesh Kumar Singh opined that the ingredients and preparation of parotas are similar to that of the products that are taxable only 5% GST and that excluding parotas from the category would be unfair. "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 Court said in its judgment of April 2. .The judgment was passed on a petition moved by Modern Food Enterprises Pvt. Ltd. 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 eligible for 18% GST as per the Rate Notifications issued by the Central/State Goods and Service Tax Act, 2017The petitioner 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 expression ‘bread’ under Heading 1905.It was contended that the products should be declared as covered under Entry 99A of Notification No.1 of 2017- Central Tax (Rate) dated 20.06.2017 and Entry 99A of Notification No. G.O (P) No.62/2017- Taxes dated 30.06.2017 of the State Government to attract a standard rate of 5% GST (2.5% central tax and 2.5 % State tax)..As per Entry 99A to Schedule I of GST Notifications issued in 2017, a reduced 5% GST rate can be availed on the sale of goods, if two conditions are satisfied, i.e.they should be classified under the Tariff Headings of either 1905 or 2106;they must be either "Khakhra, plain chapatti or roti.".The Tariff Heading 1905 comprises the following product description “Bread, pastry, cakes, biscuits and other bakers’ wares, whether or not containing cocoa, communion wafers, empty cachets of a king suitable for pharmaceutical use, sealing wafers, rice paper and similar products.".The petitioner's 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 Court concurred with the petitioner and held that Malabar Parota comes within HSN 1905, as it is akin to the products mentioned there..The petitioner was represented by advocates Gopi Krishnan Nambiar, K John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C Abraham, Raja Kannan, R Chethan Krishna, and S Parvathi. Special Government Pleader (Taxes) Muhammed Rafiq appeared for the State. .[Read Judgment]