ID Fresh told TNM that it plans to appeal against ruling by the Authority of Advance Ruling (AAR) Karnataka.

How a companys fight for less GST for frozen parotta has sparked a Twitter trend
Social Parotta Friday, June 12, 2020 - 19:03

Parotta is a dish close to every Malayalee’s heart. The layered Indian flatbread is famously eaten with egg roast or beef fry in Kerala, and beef of course has been the subject of many fierce ideological battles fought on social media. Pazham Pori too has had its fair share of limelight when the Railways removed the snack from its menu in 2020, following which it was reinstated.

But perhaps for the first time, parotta - the less contentious whole wheat accompaniment to dishes popped up as a top Twitter trend.

“HandsOffPorotta’ became the viral hashtag used to highlight a specific news report. The report says that — Frozen Parottas now attracted 18 percent GST as opposed to the earlier 5 percent GST, while ready-to-eat rotis/chapathis did not see a hike in GST.

We poked around a bit to understand why the flatbread was being discriminated against, and discovered that the issue began with one food manufacturing company’s protracted quest to understand the GST levied on its products.

Bengaluru based-ID Fresh has been selling the ‘Malabar Parota’ for over 10 years now. Until now, it has been paying a tax of 5% (Earlier VAT and now GST). But now, there is contention on whether or not it deserves to be taxed more at 18%. This legal pursuit of the instant foods company is what has now blown into a full-fledged Twitter fight over rotis versus parottas.

In October 2019, ID Fresh Foods, popular for its idli/dosa batter and ready-made parotta, approached the Authority for Advance Ruling (AAR) in Karnataka to clarify if the ‘preparation of Whole Wheat Parota and Malabar Parota (its two products) be classified under Chapter heading 1905, attracting GST at the rate of 5%’.

It wanted to clarify under what category of products did its parottas product come under.

According to ID, it should come under the category 1905 that attracts a GST rate of 5%. In 2017, ‘khakhra, plain chapati or roti’ was also added to this category under Entry 99A of Schedule 1 to GST notifications.

What is 1905? For now, understand that for the purpose of taxation, all products have a code to identify the rate of tax applicable to that product and 1905 is the code for all these products. The Customs Tariff Act 1975 lists all products with their codes, which can then be used to identify the GST rate applicable on these products.

ID Fresh contended that based on the interpretation of the Customs Tariff Act 1975, its products would come under the Section IV, which deals with prepared food stuffs, beverages, spirits and vinegar, tobacco and manufactured tobacco substitutes.

It said that since parottas are made using refined wheat flour (maida), RO purified water, edible vegetable oil, edible vegetable fat and edible vegetable salt, it should be classified under this product category and hence have a GST rate of 5%.

However, the AAR observed that the products under the 1905 category such as bread, pastry, cakes, etc are completely cooked foods and ready for consumption. But ID Fresh’ Malabar Parota and Whole wheat Parota are not ready to consume product but need to be heated before eating and therefore cannot be classified under 1905.

AAR said that chapter 21 of the Act, which covers Miscellaneous Edible Preparations has a category of food preparations, which are not elsewhere specified or included under the category 2106. This covers food items or preparations that can be used directly or after a process of cooking, dissolving, boiling, etc.

The AAR has contended the frozen parottas, therefore come under the category 2106 and not 1905.

Under the 2106 category, all kinds of food mixes including instant food mixes have a GST of 18%.

It also rejected ID’s argument that it is essentially the same product as a khakhra, plain chapatti or roti. In essence, it said that a parotta is different from a khakhra, plain chapatti or roti. Not just that, frozen roti or chappathi is only charged 5% GST as these two food items are clearly mentioned under 1905.

ID is now preparing to challenge the decision by ARR.

“We have decided to appeal against the recent ruling by the Authority of Advance Ruling (AAR) Karnataka that ‘parota’ as classified under Chapter Heading 2106 is not khakhra, plain chapati, or roti, so 18% of Goods and Service Tax (GST) is applicable,” Musthafa PC, founder of ID fresh said in a statement.

In 2018, AAR Maharashtra in a similar ruling (2018-VIL-312-AAR) had observed that the unleavened flatbread products, such as plain chapatti, tortilla, roti, roti rolls, wraps, paratha and paratha wraps are covered under Entry No. 99 A of Schedule I and therefore they are liable to GST at 5%.

“In its notification, under the Karnataka Value Added Tax Act, 2003, the Karnataka Government had reduced the tax payable for ready-to-cook chapati and parota to 5%. I’m hopeful that we will get this matter resolved soon so that our consumers can continue to enjoy healthy Indian foods at affordable prices,” he added.

While #HandsOffPorotta was more of a political hashtag, many did point out that these decisions were arbitrary and against the policy that claimed to facilitate ease of busines.