Modern Food Enterprises, a parota manufacturer, secured a significant win in the Goods and Services Tax (GST) realm. Kerala High Court ruled that Malabar ‘Parota’ qualifies as bread, subjecting it to 5% GST instead of 18% as previously determined. The decision contrasts with earlier rulings by quasi-judicial bodies.
Tax Experts’ Insights:
While advance rulings are binding on specific transactions, they hold persuasive weight for similar cases. However, high court orders set judicial precedents, potentially impacting broader interpretations. Fear of litigation may deter manufacturers outside Kerala from adopting this ruling.
Modern Food’s Argument:
Modern Food compared their parotas’ ingredients to those listed under ‘Heading 1905’, emphasizing their similarity to bread. The products are semi-cooked for shelf-life and moisture retention, akin to items classified under ‘Heading 1905’. Justice Dinesh Kumar Singh concurred with this assessment.
Precedents and Challenges:
Previous rulings by AAR benches in Gujarat and Karnataka imposed 18% GST on frozen parathas, complicating classification issues. The multiplicity of tax slabs often leads to prolonged litigation. Simplifying the classification system, possibly through slab consolidation, is suggested by industry experts.
