Paratha, popcorn and coconut oil: India's strangest tax classification fights

On 12 June 2020 the hashtag #HandsOffParotta was trending. Karnataka's Authority for Advance Ruling had held, in an order dated 22 May 2020, that the whole wheat and Malabar parotas made by ID Fresh Food (India) Pvt Ltd fell under heading 2106 at 18 percent GST; a roti paid 5 percent. The industrialist Anand Mahindra wrote of "an existential crisis for the 'Parota.'"

Advance ruling authorities in Karnataka, Gujarat, Kerala and Maharashtra, and the Kerala High Court, dealt with the question before all Indian breads were exempted from 22 September 2025. In December 2024 the GST Council explained why popcorn carried three rates, and the Supreme Court decided whether small packs of pure coconut oil were edible oil or hair oil, on excise notices first issued in February 2007.

Why was a paratha taxed at 18 percent when a roti paid 5 percent?

Until 21 September 2025 the 5 percent entry paratha makers relied on, S. No. 99A of Schedule I to Notification No. 1/2017-Central Tax (Rate), covered only "khakhra, plain chapatti or roti" under heading 1905 or 2106. Advance ruling authorities in Karnataka and Gujarat held that the parathas before them were none of these and put them under heading 2106 at 18 percent.

The Karnataka authority found that the parotas "need to be heated before consumption", whereas heading 1905 covers products already completely cooked. On 21 September 2020 Karnataka's appellate authority dismissed ID Fresh's appeal yet declared the ruling void as "vitiated by the process of suppression of material facts", declining to classify the parota while the matter was "pending in a proceeding under this Act". ID Fresh said the order turned on "a different point on jurisdiction".

Vadilal Industries Ltd asked Gujarat's authority about eight varieties and on 30 June 2021 got 18 percent under tariff item 2106 90 99; the packet said to heat each one on a medium flame for about three to four minutes. On 15 September 2022 the appellate authority agreed: a plain roti or chapatti "is consumed directly", the heating "amounts to the cooking", and "end users cannot be determinative of the classification of the product".

Kerala's authority had reached 18 percent in 2018 for Modern Food Enterprises' two Malabar parotas, and its appellate authority agreed. In Modern Food Enterprises Pvt Ltd v. Union of India, reported on 17 April 2024, Justice Dinesh Kumar Singh of the Kerala High Court held both parotas taxable at 5 percent under S. No. 99A. He found their ingredients and process "somewhat similar" to heading 1905 products. The State appealed, a Division Bench stayed the judgment in June 2024, and we have found no reported decision on the appeal as of October 2026.

Notification No. 10/2025-Central Tax (Rate) of 17 September 2025 exempts from 22 September 2025 "Khakhra; Bread (branded or otherwise), Pizza bread, roti, chapathi, paratha, parotta and other Indian breads by any name called". The official FAQ on the GST Council's 56th meeting of 3 September 2025 noted that "Bread was already exempt while pizza bread, roti, porotta, paratha etc attracted different rates." A dispute about an earlier period is still decided under the old entries.

How did popcorn end up with three GST rates?

The GST Council clarified at its 55th meeting, in Jaisalmer on 21 December 2024, that ready-to-eat popcorn mixed with salt and spices falls under tariff item 2106 90 99 and caramel popcorn, as sugar confectionery, under 1704 90 90. Salted popcorn then paid 5 percent when not pre-packaged and labelled and 12 percent when it was, and caramel popcorn 18 percent. On our reading of Notification No. 9/2025-Central Tax (Rate), all three kinds have paid 5 percent since 22 September 2025, though press reports at the time disagreed about caramel popcorn.

The clarification set off a storm on social media, Business Standard reported on 23 December 2024, and K V Subramanian, a former Chief Economic Adviser, wrote on X that "Complexity is a bureaucrat's delight and citizens' nightmare". CBIC's Circular No. 247/04/2025-GST of 14 February 2025 then said salted popcorn "has the essential character of namkeens".

When the Council cut rates in September 2025, Business Standard reported on 4 September that all popcorn would pay 5 percent, while IANS and Outlook Money reported that caramel popcorn would stay at 18 percent. We read Notification No. 9/2025 as supporting Business Standard. Its 5 percent schedule (2.5 percent central tax) lists "Sugar confectionary (including white chocolate), not containing cocoa" under heading 1704, and namkeens and "similar edible preparations in ready for consumption form, whether or not prepackaged and labelled" under 2106 90. Schedule II, the 18 percent schedule, has no entry for heading 1704.

Is coconut oil in a small bottle an edible oil or a hair oil?

Pure coconut oil sold in small quantities as edible oil falls under heading 1513 unless its packaging meets every requirement of Chapter Note 3 to Chapter 33, a tariff note on retail packing, in which case it is hair oil under heading 3305. A three-judge bench of the Supreme Court led by Chief Justice Sanjiv Khanna so held on 18 December 2024 in Commissioner of Central Excise, Salem v. Madhan Agro Industries (India) Pvt Ltd, 2024 INSC 1002.

The excise tariff charged 8 percent on coconut oil under heading 1513 and 16 percent on preparations for use on the hair under 3305. Show cause notices from February 2007, covering 2005 to 2007, proposed to tax small packs of pure coconut oil as hair oil. In 2008 the Customs, Excise and Service Tax Appellate Tribunal in Chennai ruled for Madhan Agro and for Marico and its job workers; Marico's stock exchange disclosure puts the duty sought in its case at ₹66.77 crore. A two-judge bench of the Supreme Court split in 2018, Justice Ranjan Gogoi for heading 1513 and Justice R. Banumathi for 3305. In January 2023 the Additional Solicitor General said pending matters "would aggregate to over ₹159 crores" and that notices had been issued under GST as well.

The three judges held that packing size is not a criterion under heading 1513. "Shanti Coconut Oil was marketed in containers depicting a popular film actress with flowing tresses", they noted, but "such an advertisement is not conclusive, in itself, to classify the oil as 'hair oil'." Chapter Note 3 applies headings 3303 to 3307 to products "suitable for use as goods of these headings and put up in packings of a kind sold by retail for such use".

Under GST, edible coconut oil paid 5 percent and hair oil 18 percent until 21 September 2025. From 22 September 2025, Notification 9/2025 lists coconut oil (1513) and "Hair oil, shampoo" (3305) in Schedule I at 5 percent, while other preparations for use on the hair are in Schedule II at 18 percent.

How have courts abroad decided cakes, crisps and toys?

Tribunals and courts in Britain and the United States compared each product with the words of the law. Jaffa Cakes were held to be cakes, Pringles to be similar to potato crisps, and Marvel action figures to be toys at a lower duty than dolls.

In Britain a cake is zero-rated for VAT even when covered in chocolate, and a chocolate-covered biscuit is standard-rated. When the tax authority ruled Jaffa Cakes biscuits, United Biscuits appealed and the tribunal (LON/91/0160) found enough of a cake: the batter is aerated like a sponge and a stale one goes hard as a cake does, HMRC's VAT Food manual records.

Pringles, about 40 percent potato flour (42 percent at the time), were standard-rated if they were "similar products made from the potato, or from potato flour" under the VAT Act 1994. On 20 May 2009, in Revenue and Customs Commissioners v Procter & Gamble UK [2009] EWCA Civ 407, the Court of Appeal held that they were, reversing the High Court and restoring the tribunal. Lord Justice Jacob called it "a short practical question calling for a short practical answer."

In Toy Biz, Inc. v. United States, decided on 3 January 2003, Judge Judith M. Barzilay of the US Court of International Trade held that a doll must "clearly represent a human being". X-Men, Spider-Man and Fantastic Four figures that Customs had classified as dolls at 12 percent were therefore "other toys" at 6.8 percent.

Why does HSN classification decide how much GST a business pays?

Every GST rate and exemption is written against a tariff heading and a description. The HSN code shown on an invoice, named after the Harmonised System of Nomenclature on which India's tariff is built, is the number of the heading a business has chosen. That choice fixes the rate the business charges, the input tax credit it keeps and what it owes if the department takes a different view.

Section 17(2) of the Central Goods and Services Tax Act 2017 (CGST Act) restricts credit, where inputs serve both taxable and exempt supplies, to "so much of the input tax as is attributable to the said taxable supplies". A paratha maker whose product has been exempt since 22 September 2025 sells it without tax but loses the credit on its inputs. The FAQ on the 56th meeting said that for supplies from that date "ITC will have to be reversed as per provisions of CGST Act, 2017."

When the department disagrees with a classification, it issues a notice for the tax difference with interest and penalty; the GST Council's advisory of 1 March 2024 on such notices refers to Sections 73 and 74 of the CGST Act. A business can appeal against the resulting order under Section 107 within three months of its communication, extendable by one month, and further appeals lie to the GST Appellate Tribunal and then the High Court.

On 8 October 2026 the Council recommended that no notice be issued where the tax involved is under ₹10,000, and that the ₹10,000 minimum penalty be dropped in non-fraud cases. In those cases the penalty would fall to 5 percent where tax and interest are paid within 30 days of an order under Section 73, or 60 days of one under Section 74A. As of October 2026 these await the circulars, notifications and law amendments "which alone shall have the force of law".

The Council can also settle the past "as is where is", leaving past payments as they were made. It did so for popcorn up to 14 February 2025, and on 8 October 2026 recommended the same for sublimation paper, which it said is classified under heading 4809.

How is a product classified under GST?

A product is classified under GST by the First Schedule to the Customs Tariff Act 1975, because the GST rate notifications use its headings and tariff items. Notification No. 10/2025-Central Tax (Rate) says that the Schedule's rules for its interpretation, the General Rules, apply to it "so far as may be", together with the Section and Chapter Notes, which fix what the headings cover, and the General Explanatory Notes.

Headings and notes first, then common parlance

In Madhan Agro the Supreme Court began with the first General Rule: classification follows the terms of the headings and any relevant Section or Chapter Notes, and the other rules come in only if those do not settle it. The common parlance test applies only where those words are ambiguous: tariff terms then take "the meaning that would be attached to them by those using the product". The Court cited earlier Supreme Court decisions, among them Indo International Industries (1981) and Dunlop India (1976). Kerala's authority used a commercial parlance test in reaching 18 percent for parota.

What the HSN code on an invoice does and does not decide

The HSN code on an invoice records the heading the supplier has chosen; the rate depends on that heading read with the description and any condition in the notification entry, as the popcorn entries showed. Notification No. 78/2020-Central Tax of 15 October 2020 sets how many digits of the code must appear from 1 April 2021. A business whose aggregate turnover in the previous financial year was up to ₹5 crore must show four digits on invoices to registered buyers, and a larger business six digits on every invoice.

How far can a GST advance ruling be relied on?

An advance ruling can be relied on only by the business that obtained it, and only on the facts it disclosed. Under Section 103 of the CGST Act it binds the applicant and its jurisdictional officer, and states have given opposite answers on the same product. A ruling can also be lost over what the application left out, as the Karnataka appellate authority held of ID Fresh's.

An application under Section 97 of the CGST Act and the state GST Act can ask, among other things, how a product is classified or whether a notification applies. It is filed in Form GST ARA-01 with a fee of ₹5,000 under the CGST Act, and Section 98(6) requires the authority to rule within 90 days of receiving the application. A business that disagrees can appeal under Section 100 to the state's Appellate Authority for Advance Ruling within 30 days of the ruling, extendable by another 30 days. When Vadilal, on appeal, relied on a Maharashtra ruling for Signature International Foods that had treated paratha as plain chapatti at 5 percent, the Gujarat appellate authority cited Section 103 and declined to follow it.

What should a manufacturer, trader or restaurant do about classification?

Write the classification down before the first invoice: the heading and tariff item, the notes that support it, the notification entry with its exact words and conditions, and how the trade names and buys the product. That note is the first document we ask for when a notice arrives. Our free HSN Code Finder gives the likely code for a product or service, and its rate, as a first check.

Read the product as an officer will: Madhan Agro turned on packaging and Vadilal on three to four minutes of heating, so a new pack or a new recipe should send the note back for review. Another business's advance ruling protects only that business, so where the amount at stake justifies it, apply for your own, disclose every material fact and say whether any proceeding is pending, the two points on which the Karnataka ruling fell. When a product moves to nil or exempt, rework the cost sheet before the price list, because the credit on its inputs has to be reversed.

Government sources said in June 2020 that parotas from restaurants and takeaways stayed at 5 percent, and in December 2024 that loose popcorn in a cinema was a "restaurant service" at 5 percent when "supplied independent of the cinema exhibition service". A restaurant that also sells packed food should invoice and account for the two kinds of supply separately.

When a notice arrives, compare the cost of paying with the cost of contesting before replying, and check whether the proposed 5 percent penalty has taken legal effect.

Frequently asked questions

What is the GST rate on paratha?

Nil from 22 September 2025: S. No. 100 of Notification No. 10/2025-Central Tax (Rate) exempts roti, chapathi, paratha, parotta "and other Indian breads by any name called". Before that, advance ruling authorities in Karnataka, Gujarat and Kerala held manufacturers' parathas taxable at 18 percent under heading 2106, while khakhra, plain chapatti or roti paid 5 percent. A 2024 Kerala High Court ruling of 5 percent for Malabar parota was stayed on appeal in June 2024; we have found no decision on the appeal as of October 2026.

What is the GST rate on popcorn after September 2025?

On our reading of Notification No. 9/2025-Central Tax (Rate), salted popcorn, loose or packed, and caramel popcorn have all paid 5 percent since 22 September 2025. The notification's 5 percent schedule covers sugar confectionery under heading 1704, and its 18 percent schedule has no entry for that heading. Business Standard reported the same on 4 September 2025; IANS and Outlook Money reported that caramel popcorn would stay at 18 percent. Before that, salted popcorn paid 5 or 12 percent and caramel popcorn 18 percent.

Is coconut oil taxed as edible oil or hair oil under GST?

The Supreme Court held on 18 December 2024, in an excise case, that pure coconut oil sold in small packs as edible oil falls under heading 1513 unless its packaging meets Chapter Note 3 to Chapter 33; GST uses the same headings. That meant 5 percent GST until 21 September 2025, against 18 percent for hair oil. Notification 9/2025 has put both at 5 percent since 22 September 2025.

Is a GST advance ruling binding on other businesses?

No. Under Section 103 of the CGST Act an advance ruling binds only the applicant and its jurisdictional officer, which is why the Gujarat appellate authority declined in 2022 to follow a Maharashtra ruling on paratha. Karnataka's appellate authority declared ID Fresh Food's ruling void on 21 September 2020, holding it vitiated by suppression of material facts.

Does the HSN code on an invoice decide the GST rate?

Not on its own. Rate entries combine a tariff heading with a description and sometimes a condition: until 21 September 2025 tariff item 2106 90 99 carried 5 percent for salted popcorn sold loose and 12 percent when pre-packaged and labelled. Since 1 April 2021 a business with aggregate turnover up to ₹5 crore in the previous financial year must show four HSN digits on invoices to registered buyers, and a larger business six digits on all invoices.

What happens if a business uses the wrong HSN classification?

The department can demand the tax difference with interest and penalty, and disputes can run for years: excise notices on coconut oil from February 2007 were decided by the Supreme Court in December 2024. On 8 October 2026 the GST Council recommended a 5 percent penalty in non-fraud cases where tax and interest are paid within 30 days (Section 73) or 60 days (Section 74A) of the order, which as of October 2026 has not taken legal effect.

Sources

Rulings and appellate orders for ID Fresh Food (Karnataka, 2020), Vadilal Industries (Gujarat, 2021 and 2022) and Modern Food Enterprises (Kerala, 2018); Modern Food Enterprises Pvt Ltd v. Union of India, Kerala High Court, WP(C) No. 13935 of 2021 (reported 17 April 2024); Commissioner of Central Excise, Salem v. Madhan Agro Industries (India) Pvt Ltd, 2024 INSC 1002 (18 December 2024), and Marico's stock exchange disclosure of 19 December 2024; PIB releases on the 55th, 56th and 57th GST Council meetings (21 December 2024, 3 September 2025 and 8 October 2026), with the September 2025 FAQs and factsheet; CBIC Circular No. 247/04/2025-GST (14 February 2025); Notifications No. 9/2025 and 10/2025-Central Tax (Rate) (17 September 2025); Notification No. 78/2020-Central Tax (15 October 2020) and the advance ruling procedure as summarised by ClearTax (accessed 28 October 2026); the GST Council advisory on notices (1 March 2024); CGST Act 2017, Sections 17(2), 97, 98(6), 100, 103 and 107; Revenue and Customs Commissioners v Procter & Gamble UK [2009] EWCA Civ 407 (20 May 2009); HMRC VAT Food manual VFOOD6260; Toy Biz, Inc. v. United States, Slip Op. 03-2 (3 January 2003); and reports in LiveLaw, Business Today, Udayavani, The News Minute, Bar and Bench, Business Standard, DT Next, IANS and Outlook Money (April 2018 to September 2025), and a busy.in case note.