GST on Milk | GST on Flavoured Milk

Flavored milk has found different flavors with different Authorities for Advance Rulings (AAR). While Gujarat AAR followed its counterparts in Tamil Nadu and Andhra Pradesh to hold GST at the rate of 12 percent, the Karnataka AAR went for 5 percent.

The latest rulings from Gujarat are related to two famous milk product brands, Amul and Vadilal. Gujarat Co-operative Milk Marketing Federation Ltd, the owner of the Amul brand, approached AAR to get a ruling regarding its flavored milk product sold under the trade name of ‘Amul Kool/Amul Kool Cafe’. Another application was moved with a similar question by Vadilal for its flavored milk product being sold under the trade name of ‘Power Sip’.

Categorisation of Flavored Milk

Gujarat Co-operative submitted that the process of the flavoured milk is the standardisation of fresh milk according to the fat contents and then heating at a certain temperature followed by filtration, pasteurisation and homogenisation and then mixing of sugar and various flavours and finally bottling. Highlighting the fact that since the commodity milk and milk products are enumerated in Chapter 4 of the tariff list and flavoured milk will be covered under tariff item/HSN (Harmonised System of Nomenclature, a globally accepted system for application of tariff under custom duty and GST), ‘04029990’ which means GST rate would be 5 per cent.

Giving similar arguments, Vadilal said in its application that the National Dairy Research Institute, Bangalore has also confirmed that flavoured milk falls, under Dairy produce as per the FSSAI regulation. The applicant also highlighted a ruling by Karnataka AAR which held that ‘flavored milk’ is classified under the Tariff heading 04029990 which means GST at the rate of 5 percent. The said Advance Ruling Authority has also taken note of the judgment rendered by Allahabad High Court in Gujarat Co-operative Milk Marketing Federation where it was specifically observed that ‘flavored milk’ is a form of milk, and it is neither a derivative of milk nor a milk product.

After going through all the arguments and facts, Gujarat AAR noted that this matter was represented before GST Council for its meeting on December 12. Companies requested to shift the classification so that rate could be lowered to 5 percent from 12 percent. However, the Fitment Committee (the committee of tax officials that recommend rate classification which is then considered by the GST Council) did not favor which was accepted by GST Council.

AAR also took note of rulings by Tamil Nadu’s AAR (in the matter of Britannia Industries) and Andhra Pradesh’s AAR (in matters of Tirumala Milk and Sri Chakra Milk) and accordingly held “‘flavored milk’ is classifiable under Tariff Item 2202 99 30 of the First Schedule to the Customs Tariff Act, 1975 as a ‘beverage containing milk’.” This means the GST rate would be 12 percent.

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