'Malabar Parota No Different From Bread': Kerala HC Sets Aside 18% GST, Says 5% GST Enough

The Kerala High Court in a recent order has held that Malabar 'Parota' and 'Whole Wheat Malabar Parota' is no different from 'bread' and should be taxed at the rate of 5% only instead of 18% GST. 

The court said that excluding Malabar Parota from Entry 99A of the Rate Notifications which are almost similar to Khakra, Roti mentioned in the said Entry, cannot be justified.

The Kerala High Court in a recent order has held that Malabar 'Parota' and Whole Wheat Malabar Parota is no different from 'bread' and should be taxed at the rate of 5% only instead of 18% GST. 

The petitioner had moved the court after the Kerala Authority for Advance Ruling (AAR) classified Malabar 'Parota' and Whole Wheat Malabar Parota as taxable at 18% GST. AAR held that exemption from GST would not be applicable in the case of the petitioner's products as it is applicable only for specific commodities (bread) covered under Harmonised System of Nomenclature (HSN) 1905.

Petitioner who was in the business of manufacturing and supplying Classic Malabar Parota and Whole Wheat Malabar Parota moved court contending that his products qualify as 'bread' for the purpose of taxation. It was contended that the 'bread' refers to a product prepared by cooking dough made from the dough of flour, water, and yeast by application of the process of baking, and therefore the Malabar 'Parota' and Whole Wheat Malabar Parota should be classified under HSN 1905 and consequently under Sl No. 97 of Notification No. 02/2017 liable to be exempted from GST.

The AAR however ruled that Malabar Parota could not be taxed as bread as contents of subheading 1905 would cover products of a bakery and all these items which are in ready-to-eat form. It was held that whole wheat Malabar Parota or classic Malabar Parota manufactured by the petitioner is neither a bakery product nor ready for human consumption as it needs to be heated before consumption.

The Kerala High Court ruled that Malabar Parota are similar to the products mentioned in HSN code 1905 of Chapter 19 with heading 'Preparations of cereals, flour, starch or milk; pastrycooks’ products as the ingredients used and process applied in their preparations are somewhat similar to the products mentioned in Chapter heading HSN Code 1905. The court said that excluding the petitioner’s products from Entry 99A of the Rate Notifications which are almost similar to the three products mentioned in the said Entry, cannot be justified.

"In view of the aforesaid discussion, I am of the view that petitioner's products are also exigible at the rate of 5% GST (2.5 % CGST + 2.5 % SGST) and not 18% as contended by the learned Special Government Pleader and held by the Advance Ruling Authority and Advance Ruling Appellate Authority," the court ruled.

The counsel for petitioner argued that, if the ingredients and nature of the products covered under Heading 1905 are examined, it would be evident that Malabar Parota have also almost same/similar ingredients and somewhat similar process is employed.

"Parotas are manufactured from the flour of whole wheat flour dough, water, salt , sugar, milk, solids and yeast or baking soda. Thin round sheets of dough are semi cooked on hot place (Tawa / Skillet) using oil. These are packed and can be consumed after heating them. Impugned products are semi cooked for marketing purposes to retain the optimal shelf life and moisture so that upon pre-heating, they remain soft and taste good. The petitioner’s products like pappad and pizza base are classifiable under Heading 1905 and not under entry 2106 as held by two authorities."

The counsel for the petitioner further submitted that numerous varieties of bread are made differently in different parts of the world.

"Flatbreads, whether leavened or unleavened, are mostly popular in the Middle East, Asia and Africa. Pita bread, a leavened flat bread, originated from Lebanon and is now consumed globally. Pizza bread originated in Italy and is consumed across the world. Flatbreads are indigenous to the Indian sub-continent. Roti is the generic name for Indian flatbreads which has various species cooked differently like phulka, chapati, roomali and parota or puri which is fried in oil, Kulcha, naan, tandoori and missi rotis which are prepared in employed different methods. However, the base of all these species of roti are essentially flour of some cereal (single or mixed)," the counsel for the petitioner argued in court.

It was also argued that Khakhra and Rotla which have longer shelf life are popular in Gujarat and Maharashtra, they are also the species or varieties of roti.

"The First Schedule to the Custom Tariff Act and Explanatory notes neither carve out any distinction or exception between different types of breads consumed in different parts of the world nor does it specify that only European loaf of bread will get classified under Heading 1905. The common parlance would not prevail on the HSN and Explanatory Notes," the counsel for petitioner told the court.

Literature and research papers on Indian flatbread were also submitted in court to prove that Parota is a flatbread. It was also stated that all fine dining restaurants would have all Indian flat breads including the Parotas, the category of bread in their menu.