Un-fried ‘fryums’ not ‘papad’, hence taxable at 18%

New Delhi

The good old traditional snack food 'papad' or 'pappadam', as it is known in south India, cannot be equated with packaged 'un-fried Fryums and cannot have similar tax treat­ment, the Authority for Advance Rulings has 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, the AAR said in the matter of the product under reference, where no clear defini­tion has been provided in the sta­tute, the principle of common par­lance is used. This means interpre­tation of statutes for deciphering the mind of the lawmaker 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 the principle of common parlance.

In this particular case, it is clear that all other 'un-fried packaged food' have been considered as 'nam­keen' and not as 'papad'. Hence, they attract different tax rates as compared to 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 at AMRG Associates.

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