Facing flak over a judicial authority ruling that frozen parota or layered flatbread will attract 18 per cent GST as against 5 per cent on roti, the government on Saturday clarified that items that are sealed, packed and branded attract higher GST, in line with standard global practice.
According to government sources, a frozen parota does not qualify as a staple item and is not eaten by poor but consumed by a class which can afford to pay taxes, hence falls in the 18 per cent category with the likes of biscuits, pastries, cakes etc.
The Authority for Advance Ruling, Karnataka held that frozen (and preserved) wheat parota and malabar parota which are sold in ambient and frozen form with a shelf life of 3-7 days is not a plain roti but a distinct product and shall attract 18 per cent GST.
The ruling led to widespread criticism on social media on Friday.
“It may be noted that Frozen parota is preserved, sealed packed, branded and is usually sold at higher prices… Even items like cheaper biscuits, pastries, cakes, etc, attract GST at the rate of 18 per cent. Frozen food would be more comparable to such item. Frozen foods cannot be comparable to plain roti or plain parota served in restaurants or taken as staple food, or eaten by poor on day-to-day basis,” the government official pointed out.
The rate of frozen and preserved parota was earlier discussed in 37th meeting of the GST Council. The Council did not recommend any reduction in GST rate for frozen and preserved parota reasoning that these are sold by organised sector.
The official further pointed out that it was a global practice to tax processed or packaged food at a higher rate. “For example, milk is tax free, but tetrapacked milk is taxed at 5 per cent and condensed milk is taxed at 12 per cent. The FMCG companies such as Nestle, Hindustan Lever, Coco-Cola, Pepsi etc make significant profits on sale of packaged food items by selling them at higher rates as these are largely consumed by the economically better off,” said the official.
Therefore, plain roti or parota served in a restaurant or provided in takeaway get same treatment in rates and attract 5% GST only.
“But such plain roti or parota is not a frozen product ‘Parota’ which is sold under a brand and in sealed cover with a shelf life. Hence, such frozen and preserved parota is not a like product when compared to plain roti, khakra, etc. Also, this order does not decide the rate of ordinary plain parota,” said the finance ministry official.