The Maharashtra Authority of Advance Ruling ( AAR ) has clarified the Taxability of Unleavened and Leavened Flatbread, Corn Chips, Pancake and Pizza Bread.
The present application has been filed by the applicant Signature International Foods India Pvt. Ltd. before the Maharashtra Authority for Advance Ruling. The Hon’ble Bench constituting of Shri. B.V. Borhade and Shri. Pankaj Kumar classified unleavened and leavened flatbreads, corn chips, pancake and pizza bread, the meaning and classification of which was unclear under the GST regime.
The Applicant is a private limited company incorporated under the provisions of Companies Act, 1956 engaged in the business of manufacturing, trading and exporting bakery products including flatbreads. Presently, the Applicant supplies flatbreads to retailers, canteens, airlines, hotels, hospitals, schools, restaurants, wholesalers, distributors and other foodservice operators. The products are available in an ambient and frozen format with a shelf life ranging from a few days to one year depending on the customers’ requirements.
The Authority is hence to determine the correct classification of (1) unleavened Flatbreads (2) Leavened Flatbreads (3) Corn Chips (4) Pancakes and (5) Pizza Bread.
The Applicant submits that the products supplied should be classified as the following:
The Authority after considering the submissions made by both the parties ruled as under:
After considering the ingredients and manufacturing process of the product, it was found that more than 80% of the constituent ingredients are Atta, Maida and Water. Basing arguments on the same, the applicant has submitted that the products are squarely covered by the description of ‘khakara plane chapatti or roti’. However, the revenue was of the view that food stuffs like paratha, etc. cannot be classified in the above entry.
The Authority after referring to the definitions of Chapatti and Roti under Merriam Webster Dictionary and applicant’s contentions was of the view that unleavened flatbread would be classifiable as Plain Chapatti or Roti liable to a 5% tax.
Applicant submits that similar manufacturing process is followed for manufacturing of both bread and leavened flatbread and hence, these products shall be classified as ‘bread’. The Authority then referred to the manufacturing process of ‘Bread’ as was elaborated by Wikipedia, definition of ‘naan’ under Collins English Dictionary and others, meaning and recipe of ‘kulcha’ as defined by the apex court. The Authority further held that ‘Chalupa’ which is a food product filled with various ingredients such as chicken, pork, chopped onion, etc. is not a bread and would be covered under residual entry of the notification liable to 18% GST except pita bread.
The Authority again referred to the definition of ‘Corn Chips’ and ‘wafers’ mentioned under various dictionaries. The Authority mentioned that wafers and chips are often used interchangeably and are chips eaten as a snack. Hence, it was held that the product is liable to tax at 18%.
The Authority referred to Wikipedia to state the definition of ‘Pancakes’. The ingredients of the product along with the processes involved in manufacturing it were assessed. It was discussed that pancakes are similar to cakes. Also, classification under the Customs Tariff was referred to. It was hence ruled that ‘pancakes’ is liable to tax at 18% and classifiable under heading 19 05 90 10 under relevant entry and schedule.
After going through the ingredients and manufacturing process of the product a differentiation between ‘bread, chapatti or roti’ and ‘pizza bread’, it was ruled that the schedule entry for pizza bread is wide enough to cover pizza base within its ambit and hence is liable to tax at 18%.
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