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2021 (1) TMI 693 - AAR - GSTClassification of goods - Mix flour - classified under Tariff item 1106 vide Entry No.59 of Schedule-I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 and Notification No.01/2017-State Tax (Rate) dated 30.06.2017, Notification No.01/2017-Integrated Tax (Rate) dated 28.06.2017 or otherwise? - Chutney Powder - classified under Tariff item 2106 vide Entry No.100A of Schedule-I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 and Notification No.01/2017-State Tax (Rate) dated 30.06.2017, Notification No.01/2017-Integrated Tax (Rate) dated 28.06.2017 or otherwise? - Chutney powder when supplied with Gota Mix flour and Bhajiya Mix flour - Composite supply or not having HSN of principal supply i.e. 1106 and 5% GST? Manufacturing and selling of varied types of mixed flour under the Talod brand name that are used to prepare instant Farsan and other similar dishes - HELD THAT - On going through the break-up (percentage-wise) of the flours involved in the above products, it is seen that there are a few products, in which the content of rice flour, wheat flour, wheat granules is very high and thereby falling under either of headings 1101, 1102 or 1103 instead of heading 1106. Hence all these sub-headings alongwith their chapter notes as well as explanatory notes to HSN will have to be looked into. In order to determine the classification of the above 18 items, we will be first required to refer to the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 containing the headings, sub-headings as well as the rates of Central Tax GST applicable to various goods, which are covered under 6 schedules. Recently, the Government has issued Circular No.80 dated 31.12.2018 containing clarification regarding GST rate and classification of some goods in which clarification has been issued with respect to classification of Chhatua or Sattu, which is a mixture of flour of ground pulses and cereals. The purpose of this circular being discussed here is that the said circular appears to be squarely applicable in the instant case. The issue regarding classification of Chhatua or Sattu as appearing in the said Circular - it can be seen from the above that HSN code1106 includes the flour, meal and powder made from peas, beans or lentils (dried leguminous vegetables falling under 0713) and such flour improved by the addition of very small amounts of additives continues to be classified under HSN code 1106. It is seen that products obtained from milling of dried leguminous vegetable including peas, lentils are covered under heading 11.06 and by milling of cereals (in the instant case) fall under headings 11.01, 11.02 or 1103. The applicant submitted that the product at hand is manufactured by grinding of pulses, mixing of flours and addition of a small quantity of spices and the finished product is ready and packed. The flours of grams, moong dal, rice, wheat and urad dal etc. are mixed in various proportions and packed. There is a small addition of spices etc. but no further processing of the flours is done. As seen in the explanatory notes to Chapter 11 above, flours of cereals and flours of dried leguminous vegetable and lentils are classified under Chapter 11 if they are obtained only by the milling of these raw materials and no further processing has taken place and no addition of other substances with a view for their use as food preparations has been done. If that was the case, they would be classified under heading 19.01 and such products are excluded from Chapter 11. Explanatory notes to Chapter 19.01 also states that it covers food preparations with a basis of flour or meal or starch or malt extract where other substances may be added to main ingredients such as milk, sugar, eggs, fat, oil etc. Unprocessed flour obtained only by the milling and sieving of cereals, leguminous vegetable including peas, lentils etc. are to be classified under Chapter 11 alone. In the instant case, the product has a mixture of various flours such that multiple tariffs are involved i.e. headings 11.01, 11.02, 11.03 and 11.06. Dhokla mix flour containing 45% leguminous flour, 45% of rice flour and 10% spices and other ingredients - Idli mix flour Containing 45% leguminous flour, 45% of rice flour and 10% spices and other ingredients - Dosa mix flour containing 45% leguminous flour, 45% of rice flour and 10% spices and other ingredients - HELD THAT - In this case, Rule 3(c) is applicable i.e. when goods cannot be classified by reference to Rule 3(a) or 3(b) of the Rules of interpretation of the Customs Tariff, they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Rice flour is classifiable under heading 1102 whereas leguminous flour is classifiable under heading 1106 and specific sub-heading 11061000. Hence the aforementioned products would be rightly classified under Sub-heading 11061000 of the First Schedule to the Customs Tariff Act, 1975 (1 of 1975). The same will fall at Sr.No.59 of Schedule-I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 (as amended vide Notification No.27/2017-Central Tax (Rate) dated 22.09.2017 on which GST payable is 5%. Percentage-wise break of the flours of the ingredients involved in the branded products manufactured by the applicant - HELD THAT - The products Upma mix flour and Rava mix flour each contain 70% of Suji flour (wheat granules), 20% of leguminous flours and 10% of spices and other ingredients. Similarly, Muthiya mix flour which appears at Sr.No.16 contains 90% of wheat flour and 10% of spices and other ingredients, whereas the product mentioned at Sr.No.17 i.e. Khichu mix flour contains 95% of rice flour, 2% of Sabu dana flour and 3% of spices and other ingredients. As per Rule 3(b), mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as the criterion is applicable. Accordingly, (i) Upma mix flour and Rava idli mix flour each containing 70% of suji flour(wheat granules) and 20% of leguminous flour and 10% spices and other ingredients, have the essential characters of suji flour (wheat granules) and would be classifiable under heading 1103 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975). (ii) Muthiya mix flour containing 90% wheat flour and 10% spices and other ingredients have the essential characters of wheat flour and would be classifiable under heading 1101 of the First Schedule to the Customs Tariff Act,1975. (iii) Khichu mix flour containing 95% rice flour, 2% Sabu dana flour and 3% spices and other ingredients shows the essential characteristics of rice flour and would be classifiable under heading 1102 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975) - Since the details in respect of ash content/starch content/rate of passage through a sieve etc. in respect of the products mentioned in para 13.2 above have not been furnished by the applicant, it would not be possible for us to decide whether these products fulfil the criteria or otherwise. In view of the above, we are left with no option but to conclude that the above products do not fulfil the aforementioned criteria and would therefore be classifiable under Heading 2302 of the First Schedule to the Customs Tariff Act, 1975 (1 of 1975) - Upma mix flour and Rava idli mix flour each containing 70% of suji flour(wheat granules) and 20% of leguminous flour and 10% spices as well as Muthiya mix flour containing 90% wheat flour and 10% spices are classifiable under sub-heading 23023000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) whereas Khichu mix flour containing 95% rice flour, 2% Sabu dana flour and 3% spices and other ingredients would be classifiable under sub-heading 23024000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). Chutney powder - HELD THAT - Chutney powder is classifiable under Sub-heading 21069099 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975) on which GST rate was 18% upto 14.11.2017 and 5% with effect from 15.11.2017. Whether chutney powder when supplied with Gota mix flour and Bhajiya mix flour, should be considered as Composite supply as stated by the applicant? - HELD THAT - Chutney powder and Gota mix flour or Chutney powder and Bhajiya mix flour are not naturally bundled and are not supplied in conjunction with each other in the ordinary course of business as they can be supplied separately or independently in the ordinary course of business. We therefore conclude that Chutney powder supplied with Gota mix flour or Bhajiya mix flour cannot be considered a composite supply - applicant has submitted that he provides Chutney powder in a pouch along with Gota Mix and Bhajiya Mix and no extra amount is collected for such Chutney powder and that he is charging a single price for the combined supply of Gota Mix and Chutney powder or Bhajiya Mix and Chutney powder. Further, as discussed earlier, since the aforementioned supply is not a composite supply of goods and a single price is being charged for the combined supply of Gota Mix and Chutney powder or Bhajiya Mix and Chutney powder, it will be considered as a Mixed supply of goods. Thus, it can be seen that a mixed supply comprising of two or more supplies, shall be treated as a supply of that particular supply which attracts the highest rate of tax. However, in the instant case, we find that the rate of tax of all the three products i.e. Gota mix, Bhajiya mix and Chutney powder is the same i.e. 5% GST, that a single price is being charged by the applicant for the mixed supply of Gota Mix and Chutney powder or Bhajiya Mix and Chutney powder and no extra charge is collected for the Chutney powder. Hence, we conclude that the mixed supply of Gota Mix and Chutney powder will be considered as a supply of Gota Mix (falling under Sub-heading 11061000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)) on which the GST liability will be 5%. Similarly, the mixed supply of Bhajiya Mix and Chutney powder, will be considered as a supply of Bhajiya Mix (falling under Sub-heading 11061000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)) on which the GST liability will be 5%.
Issues Involved:
1. Classification of various mixed flours under the appropriate HSN codes. 2. Classification of Chutney Powder under the appropriate HSN code. 3. Determination of GST rates applicable to the mixed flours and Chutney Powder. 4. Determination of whether the supply of Chutney Powder with Gota Mix flour and Bhajiya Mix flour constitutes a Composite Supply or Mixed Supply. Detailed Analysis: 1. Classification of Mixed Flours: The applicant manufactures various mixed flours used for preparing traditional Indian dishes. The mixed flours contain significant proportions of leguminous flours, rice flours, and other ingredients. The classification of these mixed flours under the appropriate HSN codes is crucial for determining the applicable GST rates. - Products with Predominant Leguminous Flour Content: - Khaman Mix Flour (66% leguminous flour) - Gota Mix Flour (75% leguminous flour) - Handwa Mix Flour (50% leguminous flour) - Dahi-wada Mix Flour (94% leguminous flour) - Dalwada Mix Flour (95% leguminous flour) - Meduvada Mix Flour (86% leguminous flour) - Pudla Mix Flour (96% leguminous flour) - Moong Bhajiya Mix Flour (95% leguminous flour) - Chorafali Mix Flour (98% leguminous flour) - Bhajiya Mix Flour (93% leguminous flour) These products are classified under sub-heading 11061000 of the First Schedule to the Customs Tariff Act, 1975, as they have the essential character of leguminous flour. They fall under Entry No.59 of Schedule-I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017, attracting a GST rate of 5% (2.5% CGST + 2.5% SGST). - Products with Equal Content of Leguminous and Rice Flour: - Dhokla Mix Flour (45% leguminous flour, 45% rice flour) - Idli Mix Flour (45% leguminous flour, 45% rice flour) - Dosa Mix Flour (45% leguminous flour, 45% rice flour) These products are classified under sub-heading 11061000 as per Rule 3(c) of the General Rules for the interpretation of Customs Tariff. They also fall under Entry No.59 of Schedule-I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017, attracting a GST rate of 5% (2.5% CGST + 2.5% SGST). - Products with Predominant Wheat or Rice Flour Content: - Upma Mix Flour (70% suji flour, 20% leguminous flour) - Rava Idli Mix Flour (70% suji flour, 20% leguminous flour) - Muthiya Mix Flour (90% wheat flour) - Khichu Mix Flour (95% rice flour, 2% Sabu dana flour) These products are classified under headings 1103, 1101, and 1102 respectively, based on their essential character. However, due to the lack of details regarding ash content, starch content, and rate of passage through a sieve, they are concluded to fall under heading 2302. They appear at Entry No.103A of Schedule-I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017, attracting a GST rate of 5% (2.5% CGST + 2.5% SGST). 2. Classification of Chutney Powder: Chutney Powder, consisting of 90% wood apple powder and 10% spices, is classified under sub-heading 21069099 of the First Schedule to the Customs Tariff Act, 1975. Initially, it attracted a GST rate of 18% (9% CGST + 9% SGST) till 14.11.2017. Post 15.11.2017, it falls under Entry No.100A of Schedule-I, attracting a GST rate of 5% (2.5% CGST + 2.5% SGST). 3. Determination of GST Rates: - Mixed flours classified under sub-heading 11061000 attract a GST rate of 5%. - Mixed flours classified under heading 2302 attract a GST rate of 5%. - Chutney Powder initially attracted a GST rate of 18%, which was reduced to 5% post 15.11.2017. 4. Composite Supply vs. Mixed Supply: The supply of Chutney Powder with Gota Mix flour and Bhajiya Mix flour does not constitute a Composite Supply as they are not naturally bundled and can be supplied separately. Instead, it constitutes a Mixed Supply as per Section 2(74) of the CGST Act, 2017, where a single price is charged for the combined supply. - Tax Liability on Mixed Supply: Since the GST rate for Gota Mix, Bhajiya Mix, and Chutney Powder is the same (5%), the mixed supply of Gota Mix and Chutney Powder will be treated as a supply of Gota Mix, and the mixed supply of Bhajiya Mix and Chutney Powder will be treated as a supply of Bhajiya Mix, each attracting a GST rate of 5%. Ruling: 1. Khaman Mix Flour, Gota Mix Flour, Handwa Mix Flour, Dahi-wada Mix Flour, Dalwada Mix Flour, Meduvada Mix Flour, Pudla Mix Flour, Moong Bhajiya Mix Flour, Chorafali Mix Flour, Bhajiya Mix Flour, Dhokla Mix Flour, Idli Mix Flour, and Dosa Mix Flour are classified under sub-heading 11061000, attracting a GST rate of 5%. 2. Upma Mix Flour, Rava Idli Mix Flour, and Muthiya Mix Flour are classified under sub-heading 23023000, and Khichu Mix Flour under sub-heading 23024000, each attracting a GST rate of 5%. 3. Chutney Powder is classified under sub-heading 21069099, attracting a GST rate of 18% till 14.11.2017 and 5% thereafter. 4. The supply of Gota Mix and Chutney Powder, as well as Bhajiya Mix and Chutney Powder, constitutes a Mixed Supply, with each attracting a GST rate of 5%.
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