Advance Ruling On 18% GST Application To 'Parota' Is Void Ab Initio :AAAR [Read Order]

The Karnataka Appellate Authority of Advance Ruling (KAAR) has declared the ruling given by the Authority of Advance Ruling(AAR) on the application of 18% Goods and Service Tax(GST) to whole wheat parota (fried flat bread) and Malabar Parota to be void ab initio.

The appellate authority made such a declaration on the finding that the applicant, ID Fresh Food(India) Pvt.Ltd, had filed the application seeking advance ruling suppressing the fact that investigation on tax evasion was pending against it.

Therefore, the authority held, the application was hit by Section 98(2) of the Central Goods and Services Tax Act (CGST Act) which prohibits the AAR from admitting an application when the question raised is already pending in proceedings against the applicant.

The AAAR, however, did not give a ruling on the issue whether the preparation of whole wheat parota and Malabar parota be classified under Chapter heading 1905, attracting GST at the rate of 5 per cent as the matter is pending in the proceedings.

The appellant had sought a clarification on whether its product of frozen/packaged parorta, which can be consumed by heating, attracts 5% or 18% GST. In May 2020, the Authority of Advance Ruling had ruled that the product cannot be treated as roti which attracts 5% GST. The applicant contended that parota was to be included in the entry "khakhra, plain chapati or roti" which attracts 5% GST.

Rejecting this contention, the AAR had observed :

"The products khakhra, plain chaptatti or roti are completely cooked preparations, do not require any processing for human consumption and hence are ready to eat foods preparations, whereas the impugned products are not only different from the said khakhra, plain chaptatti or roti but also are not like products in common parlance as well as in respect of the essential nature of the product. These products also require further processing for human consumption, as admitted by the applicant".

The AAR had in its order ruled that the product parota is classified under Chapter Heading 2106 and is not covered entry No. 994 of Schedule I, so 18 per cent of Goods and Service Tax is applicable.

Challenging this ruling of AAR, the applicant approached the appellate authority.

The appellate authority dismissed the appeal on all counts for suppression of facts and declared the AAR ruling to be void ab initio.

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