18% GST On Instant Flour Mixes For Ildi, Dosa As They Can't Be Classified As Sattu: GAAAR

Instant flour mixes, including idli, dosa and khaman flour, cannot be classified as chhatua or sattu and should be taxed at 18% GST, the Gujarat Appellate Authority for Advance Ruling (GAAAR) ruled.

Gujarat-based Kitchen Express Overseas Ltd had approached the GAAAR against the GST advance ruling authority’s decision, claiming that its seven instant flour mixes are not ‘ready to eat’ but have to undergo certain cooking processes and can be called ‘ready to cook’.

The company sells gota, khaman, dalwada, dahi-wada, dhokla, idli and dosa flour mixes in powder form and pleaded that these are sattu and should be subjected to goods and services tax (GST) at 5%.

The GAAAR rejected the appellant’s contention and said that ingredients used to make ‘instant flour mixes’ are not covered by the relevant GST rules as is the case with sattu. According to a circular issued by the CBIC, small quantities of ingredients mixed to make sattu are specified in the GST rules to be taxable at a 5% rate

“However, the said clarification is not applicable in the present case as the products supplied by the appellant contain spices and other ingredients which is not the case with ‘chhatua or sattu’,” the GAAAR said.

The appellate authority also said that the mere fact that the end user of the instant flour mixes has to go through certain food preparation processes before such products can be consumed is not a reason why 18 per cent GST should not be levied on them.

Abhishek Jain, head of indirect tax and partner at KPMG, said classification disputes are among the most common disputes under GST.

“Despite the issuance of circulars, different interpretations of the clarifications contained in these circulars have often added to the challenges,” Jain said.

Moore Singhi managing director Rajat Mohan said the Gujarat Appellate Authority for Advance Ruling (AAAR) upheld the decision of the Advance Ruling Authority (AAR) which classified various flours of the brand ‘Kitchen Express’, including Khaman and Dhokla, under Chapter Heading (CH) 2106 90 99, thereby subjecting them to GST rate of 18%.

“The finding was based on the fact that the products contain significant amounts of additives such as sugar, salt and spices, which distinguishes them from simpler flours falling under Chapters 1101, 1102 or 1106, which attract 5% GST,” said Mohan.