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Why 5% GST on chapati and 18% GST on paratha? Tax fixed after 20 months of fighting

More than five years have passed since the implementation of the new tax system Goods and Services Tax (GST) in the country, but many disputes related to it are still awaiting the final decision. In such a dispute, the final decision came after about 20 months, in which it has been decided to levy GST at 5 per cent on roti and 18 per cent on paratha.

Actually, the Gujarat Appellate Authority for Advance Ruling has given this verdict after 20 months on a dispute of Vadilal Industries Limited. The authority said, there is a significant difference between the products used in frozen paratha and roti, so the GST rates should be different. Earlier, Vadilal Industries had also demanded 18 percent GST on parathas with the same claim. Maharashtra’s Authority of Advance Ruling also said in a decision in the year 2018 that roti or chapati is known by different names in the country, but it cannot be charged different GST rates because of its name change.

Why is GST levied on parathas?
During the dispute, the businessmen argued that flour is the main product used in roti and paratha, but after a long battle of 20 months, the verdict went in favor of the manufacturing company Vadilal. The Gujarat Appellate Authority for Advance Ruling said in its judgment, there is a clear difference between roti and frozen paranthe.

The ruling upholds the Gujarat Authority for Advance Ruling’s ruling, which in June 2021 had said that packaged parathas should take 3-4 minutes to cook until they turn golden brown on both sides. Apart from this, the amount of flour in parantha ranges between 36 to 62 percent, which is quite different from roti.

What is the company’s argument?
Ahmedabad-based company Vadilal Industries had appealed to the AAR saying that it supplies eight types of parathas, including Malabar, Mixed Vegetable, Onion, Fenugreek, Aloo, Lachcha, Radish and Plain Paratha. Therefore, it cannot be placed in the category of plain chapati or roti and the GST rate on it should also be separate. The dispute between the company and the traders has come to an end.

Other products are yet to be decided
Actually, the controversy of roti and packaged paratha is not the only one that creates confusion regarding GST. Apart from this, there is a dispute between the tax authority and the producers regarding GST on many other products. This includes Marico’s Parachute Oil, which is not agreed upon whether it is a hair oil or just coconut oil. National KitKat – is biscuit or chocolate and Dabur Lal Dant Manjan – is tooth powder or medicinal drug. The right decision to impose GST can be taken only after its classification.