• Notification Date: 11-01-2022
• Notification No: N/A

AAAR Orders Fryums Papad to Draw 18% GST

After a lot of controversies, the Appellate Authority for Advance Rulings (AAAR) of Gujarat has decided to draw 18% goods and service tax (GST) rate on fryums papad. Deciding the GST for the ready-to-eat papad was quite a messy affair for AAAR. This would be done under a different classification. Earlier fryums was decided to be kept exempt from GST. Alisha Gruh Udyog, had filed a petition that the law has declared fryums free from any GST payment. The harmonized system of nomenclature (HSN) codes classify the products and determine the GST rates of the products.

AAR agreed with the GST authorities’ decision that fryums attracts 18% GST under HSN code 2016. But the petitioner, Alisha Gruh Udyog, says that it is supposed to come under HSN code 1905. According to the code, fryums should not include any GST.

According to AAAR, HSN 2106 includes products like sweets and namkeens. So it should come under code 1905, but not under the entry 96 of 1905 that includes papad. AAAR ruled that these include those papad products which are ready-to-cook condition. They require roasting or frying before they are consumed.

The papad products of fryums, according to the petitioner, are ready-to-eat fried papads that are coated with masala. They are packed in small packages and they do not require any further processes like roasting or frying. They can be immediately served without further processing.

According to that rule, these products should be classified under the HSN code 1905, entry 16. This entry comprises products like pastry, cakes, biscuits, and baked products. They are supposed to attract 18 percentage of tax.

As commented by Sandeep Sehgal, tax partner at AKM Global, “the issue is complicated with different sets of rulings. The latest judgment of Gujarat AAAR contradicts the earlier ruling on the similar issue delivered a few months ago and, hence the taxation of papad remains ambiguous.”

He also added, that to determine the classification of a product under HSN code, the manner of consumption should also be taken under consideration.

According to the experts, AAAR has not mentioned the earlier reports while ruling this time.

A partner at KPMG, Harpreet Singh, said that it becomes extremely confusing when multiple rulings are given on the same subject. It becomes even more perplexing if the rulings are different every time and there is no reference given regarding the past findings. He added that an establishment of Central AAR has been called and it is likely that the decision will contradict the ruling of AAAR.

The Central Board of Indirect Taxes and Customs (CBIC) has given its verdict to settle all the controversy regarding this matter. According to CBIC, “Papad, by whatever name known, is exempt from GST,” which has resolved the controversies revolving around the matter.