It’s been more than four years when GST came into force in India. And, from the first day till today, we all know how much the Government and the Tax Professionals are putting their efforts to simplify the GST laws among the common people. But, recently the Tamil Nadu AAR has passed a decision, which is going to create a lot of ambiguity among the industry.

The Tamil Nadu AAR (AAR) has passed a very important decision on idli, dosa, bajra, jowar, ragi, and other ready-to-cook mix powders.

The AAR has passed a ruling in case of an application filed by the Krishna Bhavan Foods and Sweets “the Applicant”

The case has been filled by the applicant to clarify the GST rate to be charged on the idli mix, dosa mix, and other ready-to-cook powders.

The fact of the case:-

The applicant is engaged in the manufacturing of instant food items and is famous among customers in South India in terms of their quality. They are engaged in providing health drinks as well.

Decision of the AAR

The AAR observed that the products sold by the applicant, for which ruling has been sought, are food preparations items in the form of a powder that needs to be mixed with water / boiled water / Curd to make it like a batter. The applicant is selling the product in powder form and not the batter.

As per the AAR, all 49 products of the above-mentioned categories are classifiable under CTH 2106 and the applicable GST rate is 18% (9 percent CGST, 9 percent SGST). Though, the same ready-to-cook products like Idli mix, Dosa mix if sold in batter form would be taxable at a rate of 5%.

So, this kind of legal interpretation by the AAR going to create an inverted duty structure for the entire industry and will create a lot of confusion and tax refund issues on daily basis among the taxpayers. It is going to be difficult for the entities to categories two different GST rates on the same kind of products; the difference is only by the form in which that product is going to be sold. If in Powder form then GST is 18%, if, in batter form, GST is 5%.

This decision is going to create an ambiguous situation in the taxing system when the same products sold in powder form attract a higher tax rate instead of when sold in batter form.

Source- : In re Raja Rasesh (Krishna Bhavan Foods and Sweets) (GST AAR Tamilnadu); Order No. 24/ARA/2021; 18/06/2021

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