Have you ever wondered why the humble roti, a staple in Indian households for generations, is taxed at a mere 5%, while its more indulgent cousin, the paratha, bears the weight of an 18% GST? The juxtaposition of these tax rates on two seemingly similar food items raises questions about the intricacies of India’s Goods and Services Tax (GST) system. In this article, we delve into the nuances behind the GST rates applied to roti and paratha, unraveling the complexities that govern the taxation of these quintessential elements of Indian cuisine. From the composition of these flatbreads to the legal interpretations shaping tax policies, join us on a journey to uncover the reasons behind this taxation disparity.
The Composition Dilemma
To comprehend the variance in GST rates, it’s imperative to analyze the composition of both roti and paratha. Roti, a traditional flatbread made from wheat flour, water, and salt, is a straightforward preparation primarily consumed alongside meals. In contrast, paratha, a more elaborate variant of flatbread, incorporates additional ingredients such as vegetables, spices, and oils, making it a more processed food item.
The Legal Perspective
The matter of GST on paratha was brought to light through an advance ruling issued by the Gujarat Authority for Advance Rulings (AAR) in 2021. The ruling pertained to M/s Vadilal Industries Ltd., a company engaged in the sale of packaged parathas. The appellant contested the 18% GST levied on parathas, citing the lower GST rates applied to similar food items like bread and roti.
However, the AAR upheld the higher GST rate on paratha, emphasizing its complex composition compared to basic bread or roti. This decision was subsequently reaffirmed by the Gujarat Appellate Authority for Advance Ruling (AAAR), solidifying the stance that parathas warrant a higher GST rate due to their processed nature.
HSN Code and Classification
The Harmonized System of Nomenclature (HSN) code plays a pivotal role in determining the GST rate applicable to a particular item. Parathas are classified under HSN code 21069099, distinguishing them from simpler bread or roti. The packaging instructions for parathas often include heating requirements, further delineating them as a distinct category requiring additional processing before consumption.
Roti and chapati, on the other hand, fall under the purview of HSN chapter heading 1905, attracting a lower GST rate of 5% owing to their uncomplicated preparation and consumption process.
Evolution of GST Classification
The classification and taxation of parathas under GST have undergone revisions since its inception. Initially listed under Entry No.453 of Schedule-III in the CGST Rate Notification No.01/2017, parathas were subjected to an 18% GST rate. However, subsequent amendments reclassified parathas under Entry No.23 of the same schedule, maintaining the 18% GST rate without Input Tax Credit (ITC) claims.
The divergence in GST rates between roti and paratha underscores the nuanced approach taken by tax authorities in classifying food items based on their composition and processing requirements. While roti enjoys a favorable tax treatment due to its simplicity, the more intricate preparation of paratha justifies its higher GST rate. As consumers, understanding these distinctions enables us to appreciate the rationale behind tax policies and their impact on everyday essentials.
