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Un-fried Fryums’ not ‘Papad’, hence taxable at 18%: AAR

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New Delhi, Jan. Jan 18 (IANS) The good old traditional snack food Papad or Pappadam as it’s known in South India cannot be equated with packaged ‘un-fried fryums’ and this cannot have similar tax treatment, the Authority for Advance Rulings (AAR) had ruled.

In its order rejecting a petition seeking to bring irregular sized packaged snack food as referred to as un-fried fryums at par with Papad for applicability of GST, AAR said that in matter of the product under reference where no clear definition had been provided in the statute, the principle of common parlance is used.

This means interpretation of statutes for deciphering the mind of the law maker rather than any other scientific reasoning.

With this interpretation, Papad cannot be equated with any other un-fried fryums and hence it is liable to pay 18 per cent GST, as against nil GST applicable for Papad, the AAR has said.

The AAR ruling brings further clarity in matters of taxation disputes where no clear definition of a product category is available but rates are fixed based on principle of common parlance.

In this particular case it’s clear that all other ‘un-fried packaged food’ have been considered as ‘Namkeen’ and not as ‘Papad’. And hence they attract different tax rates as compared with the traditional food item.

“Classification disputes would be the next big litigation area in GST, and practically bite every industry wherever an exemption or a lower rate of tax is being paid,” said Rajat Mohan, Senior Partner AMRG Associates.

Papad is crunchy snack that is conceptualised as a product that is raw pellet that is neither fully cooked nor ready to eat which can be stored for a longer period and needs to be cooked first either by frying or roasting before consuming as and when required. The Papad turns out to be a Papad when the dough is moulded and given the shape, usually a palm size round or may be smaller or bigger. No other product, not conforming to the typical shape or material can be classified as Papad.

–IANS

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