Masala Paan (Meetha Paan) under GST: AAR Maharashtra Rules 18% Tax and Rejects Composite Supply Claim

The Authority for Advance Ruling, Maharashtra in In re Sharad Sadashiv Patil examined how “Masala Paan” (Meetha Paan) should be treated under GST – both for classification and rate of tax, and whether it qualifies as a composite supply with betel leaf as the principal supply.

The assessee sought to argue that Masala Paan is nothing but betel leaf (which is taxable at nil rate) along with certain ancillary fillings, and therefore, the entire supply should be treated as a composite supply under Section 2(30) with betel leaf as the principal supply, attracting nil GST. The Authority did not accept this view.

Instead, after considering the ingredients, manufacturing process, and statutory definitions, the Authority held that Masala Paan is a separate, unified edible product and not a naturally bundled composite supply. It was therefore classified as a miscellaneous edible preparation under HSN 2106 9099, taxable at 18% GST.

Below is a structured analysis and summary of the ruling.

Background of the Application

The application under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 was filed by M/s. Sharad Sadashiv Patil, who proposed to start manufacturing and supplying Masala Paan (Meetha Paan) within India and overseas.

The assessee sought advance ruling on:

  1. Classification of goods/services (with reference to the second question), and
  2. Whether the supply of “Masala Paan” amounts to a composite supply with betel leaf as the principal supply and other items as ancillary.

For purposes of the ruling, the Authority treated references to the GST Act as covering both the CGST Act and the MGST Act, unless stated otherwise.

Product Description and Preparation Process

Nature and use of Masala Paan

The assessee described Masala Paan / Meetha Paan as a popular post-meal edible item in India, typically used as:

  • A mouth freshener
  • A digestive aid
  • A sweet snack consumed after heavy meals

It is traditionally prepared using betel leaves filled with sweet and crunchy ingredients such as:

  • Gulkand
  • Desiccated coconut
  • Mouth freshener mixture (Mukhwaas/Churna)
  • Tutti frutti, raisins, or chopped dates
  • Other optional flavouring or filling items

The product is perishable, meant for immediate or same-day consumption, and generally considered “best before 24 hours” from the time of preparation.

Ingredients and method (as presented by the assessee)

Typical ingredients:

  • 4 betel (paan) leaves
  • 2 tbsp desiccated coconut
  • 2 tbsp mouth freshener mix
  • 2 tbsp tutti frutti/raisins/chopped dates
  • 1 tbsp gulkand

Preparation steps:

  1. Clean and dry the betel leaves; remove the stalk.
  2. Mix the fillings (gulkand, coconut, mukhwaas, tutti frutti etc.) in a bowl.
  3. Spread the leaves on a flat surface, place the mixture in the centre of each leaf.
  4. Fold and wrap the leaf around the filling and secure, typically with a toothpick.

The end result is a ready-to-eat bite-sized sweet paan.

Distinction from Pan Masala

The assessee emphasised that their product is “Masala Paan / Meetha Paan”, not “Pan Masala”. They highlighted key differences:

  • Masala Paan is centred around betel leaf, does not contain tobacco, and is not addictive.
  • Pan Masala (as seen under the Customs Tariff in Chapters 21 and 24) is a tobacco-based or supari-based preparation, often containing tobacco/gutka, with serious health implications and a specific classification and higher tax incidence.

The assessee listed the typical ingredient-wise HSN codes and rates for components used in Masala Paan, such as:

  • Betel leaf – HSN 14049040 – 0%
  • Desiccated coconut – HSN 08011100 – 5%
  • Mouth freshener mix (Mukhwaas/Churna) – HSN 21069070 – 5%
  • Tutti frutti – HSN 08111010 – 5%
  • Betel nuts (supari – optional) – HSN 21069030 – 5%
  • Gulkand – HSN 20060000 – 12%
  • Fruit pulp/syrup/purée (flavoured paan variants) – HSN 20079990 – 12%
  • Catechu (katha) – HSN 14049050 – 18%
  • Edible lime paste (chuna) – HSN 21069099 – 5%

The assessee stressed that betel leaf remains the constant and central ingredient, while the remaining items are varied as per individual preference.

Argument for Composite Supply under Section 2(30)

The assessee invoked the definition of “composite supply” in Section 2(30):

“Composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, **which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

From this, the assessee argued:

  • Masala Paan consists of multiple taxable supplies (ingredients).