Papad vs Fryum: Traditionally made papads and frayam found in packets are made from the same ingredients but there is a big difference in their prices. This is because frayam has to pay more tax than papad. There are many other similar items that use the same ingredients to make but different rates of GST (Goods and Services Tax). The biggest reason for the difference in rates is that under the GST system, food items that require more processing to reach the consumers are taxed at higher rates.
According to Divakar Vijaysarathi, Founder and Managing Partner, DVS Advisors, the GST on food items in India ranges from zero percent to 18 percent. No GST is levied on food items that do not require much processing to make or are used fresh. In contrast, those that take several steps to reach the consumers, attract a GST of 5-18 per cent.
One decision decided the difference between papad and frayam
In the case of Jayant Snacks & Beverages Pvt Ltd, the Gujarat Bench of the Authority for Advance Ruling (AAR) had ruled for zero per cent GST on papads. The AAR bench, in its judgment, said that the traditional snack food papad cannot be treated at par with friam in the matter of tax. Earlier, some high courts had considered frayam similar to papad. The High Court had said that like papad, frayam is made in desired shape by mixing flour with spices, due to which it should be treated like papad and zero percent GST should be levied. According to Vijaysarathi, however, the AAR has proved in many of its decisions that they want to set an example and papad cannot be equated with packaged fries, i.e. cannot put both in the same tax bracket.
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In spite of same ingredients, in different GST slab rate
Apart from papad and friam, there are other things which are made from the same ingredients but they are taxed at different rates of GST.
- 5 percent GST on roti while 18 percent GST on Malabar Parota
- 5% GST on Idli/Dosa Sambar while 18% GST on ready-to-cook mix powder
- 5% GST on milk and 12% GST on flavored milk
- 12 per cent GST on fruit juices while 28 per cent GST with compensation cess of 12 per cent on carbonated fruit drinks
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Increase or decrease the burden on consumers in the GST system?
Consumers have to pay less tax under the Goods and Services Act as compared to the sales tax system. According to Vijaysarathi, this has been possible because of four GST rates of 5-28 per cent. Take the example of milk, before the implementation of GST, milk and some milk products used to attract a VAT of 2 per cent, but under the GST system, there is no GST on fresh milk and 5 per cent GST slab for skimmed milk and 12 per cent for condensed milk. kept in the GST slab. Below is the information about the changes in the tax rates before GST and after the introduction of GST-
(Article: Rajeev Kumar)
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