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Amid disputes over the contentious issue of goods and services tax (GST) rates on food items, the Gujarat high court has quashed a show cause notice sent by the GST authorities to a company, asking it to pay 18 per cent tax on unfried or uncooked extruded snack pellets.
A circular issued by the Central Board of Indirect Taxes and Customs (CBIC) in January last year had clarified that snack pellets such as fryums would draw 18 per cent GST.
The high court, while ruling in favour of J K Papad Industries, referred to an order by the Gujarat appellate authority of advance ruling (AAAR) that papad, including fryums, of different shapes and sizes, would draw nil GST.
The AAAR had modified the ruling of the AAR, which had held fryums would attract 18 per cent GST.
Meanwhile, the CBIC in August last year had clarified that the GST rate on uncooked extruded snack pellets is 5 per cent and this rate would apply prospectively.
The company, in this case, followed a ruling of the AAAR, because its case pertains to the pre-August 2023 period. The authorities, however, asked it to follow the circular issued in January last year.
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The court ruled that the tax rate only changed in August and before that the applicant was entitled to rely on the AAAR's decision.
The latest GST Council meeting earlier this month had clarified that unfried or uncooked snack pellets would remain unchanged at 5 per cent.
Sandeep Sehgal, partner-tax at consultancy firm AKM Global, said this ruling has broader implications for the industry, emphasising that businesses should not face retrospective tax demands based on misclassification or misinterpretation of regulations.
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