Taxing Taste: Malabar Parota's GST Battle Leaves It In Classification Dispute

The Kerala High Court has stayed an earlier decision imposing a 5% GST instead of the standard 18% on Malabar Parota, leaving it in a classification dispute.

The controversy dates back to 2018 when Modern Food Enterprises Pvt. challenged the GST categorisation of their Classic Malabar Parota and Whole Wheat Malabar Parota, arguing they should be taxed as 'bread'.

The company contended that their products, made from dough and baked like traditional bread, qualify under the Customs Tariff Act, 1975. They cited ingredients such as cereal flour, leavening agents, and salt, common in bread making. Despite unsuccessful appeals to tax authorities, the matter reached the high court in 2021.

According to the company, these products fall under Heading 1905 of the Customs Tariff Act, not under the earlier classification of Entry 2106.

In response, the state insisted that bread and parota are distinct in ingredients, preparation, and public perception, hence should be taxed differently. They argued against the company's claim of exemption from higher tax rates.

A single-judge bench of the high court initially sided with the company, viewing parotas akin to bread and suggesting a lower GST of 5%. However, a division bench has now put this decision on hold pending further appeal from the state.

The legal tussle continues as stakeholders await a final resolution on the GST rate applicable to Malabar Parota.