Precooked Ready-to-Eat Foods Subject to 18% GST: Ruling by Kerala AAR
Kerala’s Authority for Advance Ruling (KAAR) has determined that precooked and specially packaged ready-to-eat food products, including puli-inji, sambar curry, avial curry, kadala curry, kappa puzuhukku, and thenga varutharachatu, will incur an 18% GST. This tax rate will also apply to items like tomato rice, coconut rice, and masala rice.
The AAR stated, “These items are not simply vegetables or mixtures of vegetables, but rather food preparations made using vegetables that can be consumed directly or may require heating.” This ruling was issued following an application from HIC-ABG Special Foods Private Limited, based in Alappuzha, Kerala.
The applicant sought advance rulings on 26 types of ready-to-eat foods and one ready-to-cook dish, arguing that their products are prepared without preservatives and utilize Japanese RETORT technology, which ensures a shelf life of 18 months.
The process involves making both the food and its packaging commercially sterile. The precooked items are sealed in a multilayer pouch, vacuum-sealed, and rendered bacteria-free by retort processing. These products are ready for consumption as soon as the pouch is opened, though they may be heated if served warm.
After reviewing the facts and arguments presented, the AAR classified items like Kerala Chicken Curry, Chettinadu Chicken Curry, Chicken Biryani, Mutton Curry, Mutton Roast, Beef Fry, and Beef Roast as ‘ready-to-eat packaged food’ rather than ‘prepared or preserved meat.’ For dishes such as Soya Coconut Fry, Masala Rice, Coconut Rice, Vegetable Pulao, and Tomato Rice, the AAR categorized them under ‘food preparations not elsewhere specified or included, other.’
Harpreet Singh, Partner (Indirect Tax) at Deloitte, noted that the ruling evaluated various products from the applicant and concluded that they were ready for consumption, thus subject to the 18% tax. The conclusion stemmed from the fact that the products could be consumed directly upon opening the pouch and may require heating for serving.
The classification of food products has often been a contentious issue, with advance rulings being sought to clarify different cases. For instance, a previous ruling indicated that papad and frymes differ, with the former not attracting GST while the latter does. Additionally, food and beverage prepared in a restaurant incur a 5% GST, regardless of whether consumed onsite or for takeaway.
In a notable case involving Malabar Parotta, the AAR and AAAR ruled it should be taxed at 18%. However, the Kerala High Court later overturned this, determining that the popular flatbread should attract a 5% GST.
It’s important to note that AAR rulings apply only to the applicant and their jurisdictional tax officer. Nonetheless, these rulings can serve as a reference in similar situations and have influenced policy changes in the past.