Papad is once again in the spotlight at the Authority for Advance Rulings (AAR)—this time over a key ingredient, Papad Khar, rather than its shape. The Gujarat AAR has ruled that this essential ingredient will be taxed at an 18 per cent GST rate.
This is unique situation as multiple Advance Rulings (including Gujarat AAR/AAAR decisions) have confirmed that papad, irrespective of shape, size, or form, is exempt from GST. The Applicant submitted that following the principle established in GST jurisprudence, when finished product (papad) is exempt from GST, essential raw materials and processing ingredients used in its manufacture should logically qualify for similar treatment or at minimum preferential treatment. “Papad Khar is not a standalone product but an ingredient integral to papad production,” the applicant, Rajkot based Sardar Chemical Industries based said.
However, while disposing of the petition, Gujarat AAR said that it did find any such established principle in GST jurisprndence which suggests that raw materials used in the manufacture of the finished product should be exempt from GST when the finished product is exempt from GST. GST classification principles do not automatically indicate that raw materials should be charged at NIL rate of GST simply because the final product is exempt.
Source: The Hindu business line
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