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The Central Board of Indirect Taxes and Customs (CBIC) has made it clear that name and shape will not make any difference in taxability of papad.
On Tuesday, Chairman of RPG Enterprises had tweeted, “Did you know that a round papad is exempt from GST and a square papad attracts GST? Can anyone suggest a good chartered accountant who can make me understand the logic?” In response to his tweet, the CBIC had tweeted that notification No.2/2017-CT(R) prescribes exemption and that does note distinguish based on the shape of papad, except when served for consumption.
However, whether ‘unfried fryums’ (another common nomenclature for papad) will be taxed at the rate of 18 per cent or not is yet to be clarified. This is critical as Gujarat’s Authority for Advance Rulings (GAAR) ruled GST at the rate of 18 per cent on unfried fryum. This order was set aside by Gujarat’s Appellate Authority for Advance Ruling (GAAAR). Interestingly, ‘Fryums’ is also a registered brand name of TTK Healthcare.
The issue of taxability of papad/unfried fryums has been in news for some time as GAAR disposed of at least four applications in the last one year.
The applications
In the first three applications, filed by Piyush Jayantilal Dobaria and Swaminarayan Food (both Rajkot based) and Surat-based JK Food Industries, the authority had ruled that unfried fryums (a product made with similar ingredients and process like papad but different in shape and size) will attract GST at the rate of 18 per cent, but to the fourth application — order pronounced earlier this month — it said there is nil tax on papad of any shape and size. The fourth ruling is in line with the Appellate Authority’s pronouncement in June this year, which overturned AAR’s ruling related with Dobaria.
In the matter before GAAR in July, Ahmedabad-based Global Gruh Udyog sought advance ruling about “classification of the goods intended to be produced such as puripappad and unfried papad.” It also submitted that for both the products, main ingredients include wheat flour, atta, rava, sago starch, papadkhar and oil etc.
The applicant contended that his product is papad which is neither a cooked food, nor an instant food for human consumption. Consumer needs to fry or roast the product to make it ready for consumption, it said and argued that 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 had observed that the said goods are thin and wafer-like product and at this stage, not ready for consumption. “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 said while ruling an exemption.
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