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2019 (11) TMI 1326 - AAR - GSTRate of GST - outward supply of Flavoured Milk - HELD THAT - The applicable rate of GST is 18% (9% CGST and 9% SGST) on all goods except the goods specified in the schedules I, II, IV, V, VI of the said Notification. Further, for interpretation of the said notification, the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as FS to CTA, 1975 ) are to be applied. The applicant informed that the process of the flavoured milk is standardisation of fresh milk according to the fat contents and then heating at certain temperature followed by filtration, pasteurisation, and homogenisation and then mixing of sugar and various flavours and finally bottling - The applicant did not provide any details what are the flavours they are using in the preparations. As seen from their website http //www.tirumalamilk.com/flavoured-milk.php they are preparing flavoured milk of various flavours like strawberry, pista, mango, vanilla, badam, chocolate, rose, saffron, cardamom etc. The applicant stated that (i) adding flavours to milk does not change essential character of milk; (ii) flavoured milk is a substitute for milk (iii) it is a simple preparation of milk; (iv) no manufacturing process is involved nor does milk change its composition in any way and opined that the commodity milk and milk products are enumerated in Chapter 4 and they want clarification that under which tariff item / HSN code is applicable to the above said flavoured milk. Under the GST provisions the interpretation of the said Notification is to be under the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). Thus, 'flavoured milk' is classifiable under tariff item 2202 9930 of the First Schedule to the Customs Tariff Act,1975 as a beverage containing milk under HS code 2202. The rate of tax applicable for the said tariff item is 12% GST (6% CGST 6% SGST) under entry no. 50 of Schedule II of Notification No.1/2017 - Central (Rate) dated 28.06.2017 as amended.
Issues Involved:
1. Classification of "flavoured milk" under the appropriate Harmonized System of Nomenclature (HSN) code. 2. Determination of the applicable Goods and Services Tax (GST) rate for "flavoured milk." Issue-wise Detailed Analysis: Issue 1: Classification of "Flavoured Milk" under the Appropriate HSN Code The applicant, engaged in the manufacturing of milk and milk products including "flavoured milk," sought clarification on the HSN code for "flavoured milk." The applicant argued that adding sugar and flavours to milk does not alter its essential character and that "flavoured milk" should fall under Chapter 4 of the Customs Tariff Act, 1975, which deals with dairy produce. The Authority for Advance Ruling (AAR) examined the manufacturing process of "flavoured milk," which involves standardization of fresh milk, heating, filtration, pasteurization, homogenization, and the addition of sugar and various flavours. The AAR noted that these processes result in a preparation that is no longer fresh milk. The AAR referenced multiple legal precedents to determine the classification. The Hon'ble Madras High Court in the case of the State of Tamil Nadu vs Tvl. Ganesh Corporation defined "beverage" as a liquid for drinking other than water, and the CESTAT, Bangalore in the case of M/s Ernakulam Reg. Co-Op. Milk Products Union Ltd. vs. CCE, Kochi classified flavoured milk as a beverage containing milk under Chapter 22. Further, the Hon'ble High Court of Gujarat in the case of M/s. KAIRA DIST. CO-OP. MILK PRODUCERS' UNION LTD Vs. UOI upheld that "flavoured milk" falls under Tariff Item No. 2202 90 30, which covers "beverages containing milk." The AAR concluded that "flavoured milk" is classifiable under tariff item 2202 9930 of the First Schedule to the Customs Tariff Act, 1975, as a "beverage containing milk." Issue 2: Determination of the Applicable GST Rate for "Flavoured Milk" The AAR referred to Section 9 (1) of the CGST Act, 2017, which allows the Central Government to notify GST rates on goods. According to the Notification No.1/2017 - Central Tax (Rate) dated 28.06.2017, Schedule III specifies a 9% Central Tax rate on goods not listed in Schedules I, II, IV, V, and VI, resulting in an 18% GST rate (9% CGST and 9% SGST). However, the AAR noted that flavoured milk falls under HS code 2202, which is listed under entry no. 50 of Schedule II of the said notification. This entry specifies a GST rate of 12% (6% CGST and 6% SGST) for "beverages containing milk." Ruling The AAR ruled that the HSN code for "flavoured milk" is 2202 9930, and the applicable GST rate is 12% (6% CGST and 6% SGST) under entry No. 50 of Schedule II of Notification No.1/2017 - Central (Rate) dated 28.06.2017 as amended.
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