Gujarat AAR: Papad appears to be the flavor of the season for Gujarat’s Authority of Advance Rulings (GAAR), whose recent judgment said that this wafer-like product is exempt from GST even if its shape and size changes.
With this, GAAR has resolved at least four applications regarding the applicability of GST on papad /unfried-fryums. In the first three applications, Gujarat AAR ruled that unfried fryums (a product made with similar ingredients and process as papad but different in shape and size) will attract GST at the rate of 18%—filed by Piyush Jayantilal Dobaria and Swaminarayan Food (both Rajkot-based) and Surat-based JK Food Industries.
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However, in the fourth, which was released in the month of july 2021, it came to the decision that papads of any form or size should be tax-free. The fourth ruling is consistent with last month Gujarat AAAR (Appellate Authority for Advance Ruling) decision, which overruled the AAR’s Dobaria ruling.
In the most recent case, Global Gruh Udyog of Ahmedabad approached Gujarat AAR for decision on the “classification of the goods intended to be produced such as Puripappad and Unfried Papad.” The same machinery is used to make Jeera papad, Red Chilli papad, Green Chilli papad, Rice papad, Pauapapad, Udadpapad, Mung papad, and Black pepper papad. It was also submitted that main ingredients include wheat flour, atta, rava, sago starch, papadkhar and oil etc for both the products.
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The applicant claimed that his product is papad, which is not cooked nor ready-to-eat. To prepare it for eating, the consumer must fry or roast the product. According to HSN (Harmonised System of Nomenclature) norms of classification for goods, specific headings will take priority over general headings. The application mentioned HSN chapter 19 under GST, which is titled “Preparation of cereals, flours, starch, or milk, pastry cooks’ goods.” HSN 1905 reads, “‘Papad,’ by whatever name it is known, except when served for eating,” in the same chapter. The applicant concluded: “The classification itself concluded that papads are known by varieties of names and it shall remain papad even if known by any other name.”
The AAR concluded that the items are thin and wafer-like products that are not yet ready to eat based on the hearing and facts. “Traditionally, papad has been prepared manually, in round shape. However, when ingredients and process are similar to ‘papad’, then the product in question is nothing but a kind of ‘papad’ irrespective of their shape and size ,” it stated in ruling exemption as given by notification number no. 02/2017,” it stated in ruling exemption as given by notification number no. 02/2017.
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It was finally ruled out that Papad of any size and shape will attract Nil GST Rate. Although these decisions are not binding norms for other assessees or the other States’ AARs, the concepts put forth by these rulings may assist in the GST classification disputes to other.
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