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Bread versus Rusk tax case

Two High Courts have disagreed on whether rusk is bread; the Supreme Court must now decide.

It’s a never-ending debate. Whether the Rusk is a bread or biscuit, bread without moisture or simply rusk?  Well, now the Himachal Pradesh High Court, after 12 years, has come to the conclusion that rusk is actually bread-sans-moisture and, as such, exempt from Value Added Tax (VAT). Yet this matter is not yet settled. In Meghalaya, the High Court had earlier decided that rusk was different from bread. Hence, there would be no exemption from VAT.

The distinctions are significant because VAT has been subsumed into Goods & Services Tax (GST) and continues to be relevant in the present taxation regime. Also, considering contrary rulings by different High Courts, the issue is expected to be finally settled by the Supreme Court.

Meghalaya High Court, in a ruling on rusk, was categorical that rusk was not bread and, as a value-added-product, would not get exemption from VAT. According to the bench, the answer is obvious: bread is bread and rusk is rusk, and the two cannot be equated, upholding the appellate judgement about no exemption. Applying the common parlance test, the court questioned whether a person desirous of buying bread would ask for rusk at a shop.

However, the Himachal HC has a different view. It is said that a majority of the ingredients in rusk and bread are the same and the difference in ingredients in the two products is minuscule, and it is only the duration of the baking which makes the difference between the two.

“And as per the dictionary meaning of rusk, it would be established that it is nothing but virtually a slice of bread dried and cooked again in the oven,” a division bench of the court said recently while disposing of a case filed by SS Food Kather in 2010. The petitioner had moved court after being levied VAT at the rate of 13.5 per cent for rusk.

The bench took note of observations made by the Allahabad High Court in a similar matter where it was said that the word rusk had been defined in the Concise Oxford English Dictionary to mean a dry biscuit or a piece of twice-baked bread, especially as prepared for use as baby food. Similarly, Collins Cobuild Advanced Learner’s English Dictionary defines rusk as a hard, dry biscuit that is given to babies and young children.

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