The Kerala High Court has declared that the ‘Malabar Parota’ and the ‘Whole Wheat Malabar Parota’ are akin to ‘bread’ and hence should be taxed at the rate of 5% GST instead of the previously imposed 18% GST.
The directive came from the bench of Justice Dinesh Kumar Singh in response to a petition filed by Kochi-based Modern Food Enterprises Pvt Ltd seeking the same relief.The petition challenged the order of the appellate authority for Advance Ruling, Kerala, which had determined that the petitioner’s products, namely ‘Classic Malabar Parota’ and ‘Whole Wheat Malabar Parota,’ were subject to 18% GST as per rate notifications issued by the Central/State Goods and Service Tax Act, 2017.
The petitioners argued their products fell under the classification of bread, specifically under the First Schedule to the Customs Tariff Act, 1975, as Indian flatbreads were covered by the expression ‘bread’ under Heading 1905 of the said schedule. They also claimed exemption rights. The state countered the arguments, stating that parota did not fit within the description of bread, branded or otherwise. They argued parota was distinct from bread and therefore not entitled to the exemption claimed by the petitioner. The state emphasized that taxing statutes could not be interpreted based on presumption or assumption, and bread and parota were distinguishable goods in both commercial and common parlance due to differences in ingredients, preparation process, and baking methods.
However, the single bench observed that while the most common ingredients of products falling under Heading 1905 were cereal flours, leavens, and salt, they could also contain other ingredients such as gluten, starch, milk, sugar, fats, improvers, etc, like yeast, sourdough, baking soda, which facilitated fermentation and improved characteristics and appearances of the products. The products under this heading could also be obtained from dough based on the flour of any cereal. Given that the petitioner’s products were similar to those mentioned products and had similar ingredients and preparation processes, the bench ruled that taxing the petitioner’s products at the rate of 18% would not be justified and ordered accordingly.
