2020 (1) TMI 1123 - AAR - GST

Classification of goods - rate of GST - Milk Powder - 'lnstant Tea Whitener' which would be used like any milk powder used in hotels, restaurants, etc. as well as households for making instant tea and coffee and known as milk powder - HELD THAT - The product in question i.e., 'Instant Tea Whitener' is a product made out of standard liquid milk which undergoes various processes and added with some other additives. Even after addition of other additives, it remains to be milk powder and in common parlance, it would be known as 'Instant Tea Whitener/milk powder'. In the present case, the main ingredient/ essential character of the product in question is given by liquid milk. We are in unison with the contention of the applicant that the said product cannot be manufactured without milk and all other ingredients are ancillary in nature - the impugned product shall be aptly classifiable under Chapter Heading 0402 and accordingly liable to such GST rate as prescribed under Notification No. 01/2017-Central Tax (Rate), dated 28-6-2017 (as amended).

Summary

Issues: Classification of a new product 'Instant Tea Whitener' under GST Tariff and determination of applicable GST rate.

Classification of the product:
The applicant, a company processing milk, sought an advance ruling on the classification of their new product, 'Instant Tea Whitener,' proposing it to be under Chapter Heading 0402 of the GST Tariff. They argued that even with additional ingredients, the product retains the essential character of milk powder. Relying on rules of interpretation, they emphasized the significance of liquid milk in the product's manufacturing process. The Authority found the issue fell under Section 97(2)(a) of the CGST Act, admitting it for consideration. Examining the Tariff, the Authority noted that Chapter Heading 0402 covers products like milk and cream with added sugar or sweeteners. Considering the detailed explanation provided by the applicant, the Authority agreed that the product could be classified under Chapter Heading 0402 due to its composition primarily involving liquid milk.

Applicable GST rate:
The applicant also inquired about the GST rate applicable to the 'Instant Tea Whitener' under the proposed classification. The Authority referenced Notification No. 1/2017-Integrated Tax (Rate) to determine the GST rate for products falling under Chapter Heading 0402. They highlighted that the product, despite additional ingredients and processing, remained essentially a form of milk powder known as 'Instant Tea Whitener.' Following a thorough analysis of the rules of interpretation and the product's composition, the Authority concluded that the 'Instant Tea Whitener' should be classified under Chapter Heading 0402 of the GST Tariff. Consequently, the product would be subject to GST at the rate specified in Notification No. 01/2017-Central Tax (Rate), dated 28-6-2017. The ruling was declared valid unless voided under specific provisions of the CGST Act, 2017.

Conclusion:
The Authority's ruling determined that the 'Instant Tea Whitener' should be classified under Chapter Heading 0402 of the GST Tariff and would be subject to GST at the applicable rate specified in the relevant notification. The decision was made after considering the product's composition, manufacturing process, and essential character primarily derived from liquid milk, in line with the rules of interpretation under the CGST Act, 2017.