Page 58 - GSTL_2nd July 2020 _Vol 38_Part 1

J32 GST LAW TIMES [ Vol. 38
In the case of ID Fresh Foods, the AAR ruled that frozen parota would
attract 18% GST and not 5% since it does not meet the definition of roti or khakra.
Social media was abuzz with jokes about the decision.
A Government official even went to the extent of defending the decision
and stated that the poor do not eat frozen parota. In these times, the last thing the
nation needs is a justification to levy a higher tax on the rich and a lower tax on
the poor.
The crux of the problem lies in the Harmonised System of Nomenclature
(HSN) Codes that we decided to needlessly bring into the GST law from the
erstwhile laws. It is understandable to have a laundry list of HSN Codes for Cus-
toms laws but not for a largely domestic law such as GST.
The problem lies in the fact that this laundry list is extremely lengthy,
has innumerable chapters and sub-headings within chapters - it almost looks like
a work of modern art with a title. Due to this, readymade garments and ready-
made sarees can have two different codes and rates and we can have complicat-
ed entries such as oil-cake and other solid residues, whether or not ground or in
the form of pellets, resulting from the extraction of vegetable fats or oils, other
than those of Heading 2304 or 2305 (this falls under Heading 2306).
In the case of ID Foods, the controversy was whether parota would fall
under Heading 1906 “Bread, pastry, cakes, biscuits and other bakers’ wares,
whether or not containing cocoa; communion wafers, empty cachets of a kind
suitable for pharmaceutical use, sealing wafers, rice paper and similar products”
or under Heading 2106 that covers “preparations for use, either directly or after
processing (such as cooking, dissolving or boiling in water, milk, etc.), for human
consumption, provided that they are not covered by any other heading of the
Nomenclature.”
ID contended that the product merits classification under Chapter Head-
ing 1905, under the product description of ‘Khakhra, plain chapatti or roti” quot-
ing Notification No. 1/2017-C.T. (Rate) as amended by Notification No. 34/2017-
C.T. (Rate).
Notification No. 34 inserted a new Entry No. 99A with the description
“Khakhra, plain chapatti or roti”, without defining the said description. The
AAR was of the opinion that 2106 suited frozen parotas better since it is not
khakra, plain chapatti or roti.
Why khakra?
Though it is not within the purview of the AAR, no one questioned as to
why the persons who drafted the HSN Codes did not think of including a staple
Indian food such a parota in the Code but could think of a not-so-common item
such as Khakra. Did they intend parota when they meant plain roti? Can parota
be included under “similar items” mentioned in HSN Code 1906? Should plain
parota also be taxed at 18%? It is to be noted that the decision of the Karnataka
High Court is silent on plain parota. One more AAR decision?
The CBIC may not want to make an effort to simplify the HSN Code
merely due to the number of entries therein and the sheer effort that this task can
take. They can make a beginning though by restricting the HSN Code only to the
chapter headings. Next, they can attempt a rationalisation of the chapter head-
ings.
In the case of parota, “Ready to eat foods” can be one chapter heading

GST LAW TIMES  2nd July 2020  58
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