2018 (11) TMI 279 - AAR - GST

Classification of goods - Classic Malabar Parota - Whole Wheat Malabar Parota - whether classified as bread classifiable under Heading 1905 and eligible for GST exemption or not - exemption from GST vide N/N. 2/2017 - Central Tax/ SRO No.361/2017. Held that - Bread is a staple food prepared by cooking dough of flour, water and yeast. Whereas parotta is prepared by using ghee or oil. The dough is rolled out and brushed with ghee or oil then folded again, brushed with more ghee and folded again. This is then rolled out to a circle and cooked on a buttered griddle. The heat makes the layers of dough puff up slightly, resulting in a more flaky texture - As per entry 97 of Notification No.2/2017 - Central Tax / SRO. No.361/2017, only specific commodity Bread branded or otherwise covered under HSN 1905 is eligible for exemption. As there is substantial distinction between bread and parotta, in preparation, use, taste, digestion, even though both of them are used as food. Therefore the exemption given to the pecific commodity under GST tariff Bread branded or otherwise is eo nomine exclusively covered under HSN 1905. It has no wider scope to incorporate different food stuff prepared using wheat flour. The word Food Preparations connotes preparations for use, either directly or after processing such as cooking for human consumption. Therefore all food preparations which are not specifically mentioned in any other entry squarely comes under Heading 2106. The plain language used in the heading does not need an interpreter, absolute sententia expositore non indiget. Ruling - Classic Malabar Parota and Whole Wheat Malabar Parota classified under Schedule III of GST Laws, vide Heading 2106 Food preparations not elsewhere specified or included and is taxable @18% GST. Eligibility of exemption from GST vide Notification No.2/2017 - Central Tax/ SRO No.361/2017 is applicable only for specific commodity Bread branded or otherwise covered under HSN 1905.

Summary

Issues Involved:
1. Classification of 'Classic Malabar Parota' and 'Whole Wheat Malabar Parota'.
2. Eligibility of exemption from GST under Notification No. 2/2017 - Central Tax/ SRO No.361/2017.

Classification Issue Analysis:
The applicant, a manufacturer of 'Classic Malabar Parota' and 'Whole Wheat Malabar Parota', argued that these products should be classified as bread under Heading 1905 for GST exemption. The products were described as flatbreads made from wheat flour, edible vegetable oil, milk solids, sugar, salt, and yeast. The Authority examined the definition of bread and noted that 'Parotta' falls under the category of bread as per the explanatory note to Heading 1905. The process of preparing 'Parotta' involves mixing, kneading, sheeting, and baking the dough, making it a variant of bread. The FSSAI certification also classified these items as bread, further supporting their classification as such.

Exemption Eligibility Issue Analysis:
The Authority analyzed the eligibility of GST exemption under Notification No. 2/2017 for the specific commodity 'Bread branded or otherwise' covered under HSN 1905. It was argued that 'Parotta' does not fall under this specific commodity as there are substantial distinctions between bread and 'Parotta' in terms of preparation, taste, and usage. The commercial parlance test was applied, highlighting that 'Parotta' is not commonly considered as bread in the market. Additionally, Schedule III of GST Laws categorizes 'Food preparations not elsewhere specified or included' under Heading 2106, which is taxable at 18% GST. Specific exclusions under this heading, such as 'Khakhra' and 'Plain Chapatti or Roti', are taxed at a reduced rate of 5%. The case law cited regarding 'Parata' further supported the classification of 'Parotta' under 'Food preparations not elsewhere specified or included'.

Conclusion:
The Authority ruled that 'Classic Malabar Parota' and 'Whole Wheat Malabar Parota' are classified under Heading 2106 of GST Laws as 'Food preparations not elsewhere specified or included' and are taxable at 18% GST. The exemption from GST under Notification No. 2/2017 is applicable only to the specific commodity 'Bread branded or otherwise' covered under HSN 1905, excluding 'Parotta' from this exemption category. The distinction between bread and 'Parotta' in terms of preparation and usage led to the decision that 'Parotta' does not qualify for the GST exemption meant for bread products.