Did you know? GST on roti is 5% but 18% on paratha - here's why

Have you ever wondered why the simple roti, a staple in Indian households for generations, is taxed at just 5 per cent, while the more indulgent paratha is taxed at 18 per cent GST? This difference in tax rates for two similar foods shows the complexities of India¡¯s Goods and Services Tax (GST) system. In this article, we explore the reasons behind the GST rates for roti and paratha, uncovering the factors that determine the taxation of these key elements of Indian cuisine. From the ingredients of these flatbreads to the legal views shaping tax policies, join us to understand why there is a difference in their taxation.

Composition Differences

To understand why the GST rates differ, it's important to look at what roti and paratha are made of. Roti is a simple flatbread made from wheat flour, water, and salt, usually eaten with meals. Paratha, on the other hand, is a more elaborate flatbread with added ingredients like vegetables, spices, and oils, making it more processed.

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Did you know? GST on roti is 5% but 18% on paratha - here's why | Freepik

Legal Rulings on GST

The GST issue for paratha was highlighted in 2021 by the Gujarat Authority for Advance Rulings (AAR). This case involved M/s Vadilal Industries Ltd., which sells packaged parathas. The company argued against the 18 per cent GST on parathas, noting that similar foods like bread and roti have lower GST rates.

Complex Composition and Higher Tax

However, the AAR upheld the 18 per cent GST for parathas due to their complex composition compared to simpler bread or roti. This decision was later confirmed by the Gujarat Appellate Authority for Advance Ruling (AAAR), reinforcing that parathas require a higher GST rate because they are more processed.

HSN Code Classification

The Harmonised System of Nomenclature (HSN) code helps determine the GST rate for items. Parathas fall under HSN code 21069099, setting them apart from simpler bread or roti. Parathas often come with heating instructions, further classifying them as needing additional processing before being eaten.

Lower GST for Simpler Preparations

Roti and chapati, however, are under HSN chapter heading 1905, which means they attract a lower GST rate of 5 per cent due to their straightforward preparation and consumption.

Evolution of GST Classification

Since GST was introduced, the classification and taxation of parathas have evolved. Initially, they were listed under Entry No.453 of Schedule-III in the CGST Rate Notification No.01/2017, with an 18 per cent GST rate. Later, they were reclassified under Entry No.23 of the same schedule, still attracting an 18 per cent GST rate without Input Tax Credit (ITC) claims.

Understanding the Tax Differences

The difference in GST rates between roti and paratha shows how tax authorities classify food items based on their composition and processing needs. While roti gets a lower tax due to its simplicity, the more intricate making of paratha justifies its higher GST rate. Understanding these differences helps us appreciate the reasons behind tax policies and their effects on everyday items.

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