Instant Flour Mixes and GST Classification
The Gujarat Appellate Authority for Advance Ruling (GAAAR) recently clarified that instant flour mixes for dosa, idli, and khaman cannot be classified as chhatua or sattu. Consequently, these mixes are subject to an 18% GST.
Case Background
Kitchen Express Overseas Ltd, based in Gujarat, contested the GST advance authority’s ruling. They argued that their seven types of instant flour mixes, which include gota, khaman, dalwada, dahi-wada, dhokla, idli, and dosa, are “ready to cook” rather than “ready to eat,” and should thus attract a 5% GST similar to sattu.
GAAAR’s Decision
The GAAAR disagreed with Kitchen Express’s contention. They noted that the ingredients used in these instant flour mixes do not align with the GST rules applicable to sattu. According to a CBIC circular, only specific ingredients in small quantities qualify for a 5% GST rate when making sattu. The presence of additional spices and other ingredients in these instant mixes excluded them from this classification.
Expert Opinions
Abhishek Jain, Indirect Tax Head & Partner at KPMG, highlighted that classification disputes are a frequent source of litigation under the GST framework. Despite existing circulars, varying interpretations often complicate these issues.
Rajat Mohan, Executive Director at Moore Singhi, affirmed the GAAAR’s decision. He stated that the significant inclusion of additives like sugar, salt, and spices in Kitchen Express’s products distinguishes them from simpler flours, which attract a lower GST rate of 5%.
Conclusion
The GAAAR’s ruling emphasizes that the classification of instant flour mixes under GST is dependent on their composition. The presence of additional ingredients justifies a higher tax rate, underscoring the importance of adhering to specified ingredient lists for lower GST rates. This decision serves as a crucial reference for businesses dealing in similar products.