Britannia asked to go back to DGGI saying kulcha is bread, eligible for GST exemption
Britannia Industries will have to make a submission before Directorate General of GST Intelligence (DGGI) that ‘Kulcha’ is ‘bread’ and it deserves exemption. This action is required because of a recent ruling by the Calcutta High Court.
The issue surfaced on December 16, 2021 when DGGI conducted a search at the petitioner’s premises in Delhi. A Show Cause Notice (SCN), dated August 3, 2024, was issued seeking recovery of over Rs.105 crore in GST, along with interest and an equivalent penalty or six financial years (FY 2017-18 to FY 2022-23
The SCN contains several allegations against the company. First, it accuses the the company of wrongfully availing the benefit of an exemption on the supply of ‘Kulcha’ by misclassifying it as ‘bread’. A notification, dated June 28, 2017, prescribes exemption for ‘Bread (branded or otherwise), except when served for consumption and pizza bread’.
The company approached the High Court with a plea to quash the SCN. It contended that the SCN is without jurisdiction and has been issued in gross violation of the principles of natural justice.
In its submission, the tax department said that the classification of ‘Kulcha’ as ‘Bread’ and subsequent claims for exemption constitute wilful misstatement. At the same time, rules clearly exclude such products from exemption. The ‘Common Parlance Test’ as held in matter related with Signature International Foods India Pvt (2019) confirms that products like ‘Kulcha’ do not fall under the definition of ‘Bread’ for exemption purposes.
