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 that 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.