Fixing AAR

In June, the Karnataka Authority for Advance Rulings (AAR) for Goods and Services Tax (GST) ruled that Malabar Parota is not the same as ready-to-eat chappati/roti as it has be processed further for consumption, and hence should be taxed at 18 per cent and not 5 per cent (tax rate for chappati). There was outrage and, soon, memes around the ruling started doing rounds of social media.

Blame it on flaws in the way AARs are constituted or complexity of India’s tax laws, the Karnataka AAR is not the only one that has been in news of late for wrong reasons.

Take the issue of tax on compensation paid to directors of an incorporated entity. Two state AARs — Karnataka and Rajasthan — came up with different interpretations and rulings