The Gujarat Appellate Authority for Advance Ruling has clarified that flour mixes containing additives are subject to an 18% Goods and Services Tax (GST) as they are considered food preparations for which a lower tax rate is not specified by the law.
A company based in Gandhinagar, selling flour mixes for dishes like idli, dhokla, and dahi vada, had applied for this ruling. The company argued that these flour mixes should fall under a category eligible for a 5% tax rate.
In its order on 29 May, the authority stated that flour mixtures with spices and other ingredients in unspecified proportions cannot claim the lower tax rate. This decision upholds an earlier ruling by the Gujarat Advance Ruling Authority.
Citing a 2018 revenue department order, the Authority emphasized that mixtures of flour of ground pulses and cereals, including those improved by adding “very small amounts of additives,” are taxed at zero or 5%. If unbranded, these mixtures do not attract GST; if branded and packed, they attract a 5% tax. However, mixtures with additives in unspecified proportions do not benefit from the lower rate.
The appellate authority clarified that only flour “with very small quantities of specified substances” qualifies for the lower tax rate. In the case at hand, the additives ranged from 5-27%.
Advance rulings enable companies to seek clarity on tax matters from the authorities, helping to prevent litigation and ensure certainty about their obligations.
Experts note that classification of products and services is a common area for litigation under GST. Abhishek Jain, indirect tax head and partner at KPMG, highlighted that despite the issuance of circulars, differing interpretations of the clarifications provided have often elevated the challenges in classification disputes.