Flavoured Milk classifiable as a beverage, attracts 12% GST: AAAR [Read Order]

In a significant case of Vadilal Industries, the Gujarat Appellate Authority of Advance Ruling (AAAR) ruled that the flavoured milk, named ‘Power Sip’ is classifiable under beverages and not flavoured Milk and upheld the ruling of AAR.

The appellant engaged in the manufacture of goods like Ice Cream, ready-to-eat food and various milk products. Among other products, they are producing flavoured milk under the trade name of "Power Sip".

The appellant contended that the product was classified under milk as it was made by standardisation of fresh milk according to the fat contents and heating at a certain temperature followed by filtration, pasteurisation, homogenisation, and then mixing of sugar as well as various flavours.

It was argued by the appellant’s advocate, Shri Amal Dave that adding flavours to milk doesn’t change the essential character of milk.

The Gujarat Authority for Advance Ruling observed that chapter HSN 0402 does not cover beverages of milk flavoured with cocoa or other substances and ruled that “'Flavoured Milk' is classifiable under Tariff Item 2202 99 30 of the first schedule of the Customs Tariff Act, 1975 as a 'beverage containing milk' "

It was argued that the Classification of products under GST requires looking into aspects like common parlance, end-use, technical specifications, constituents of the products etc.

A Coram consisting of Vivek Ranjan, member (CGST) and Milind Torawane, member (SGST) observed that the heading 0402 contains full cream milk and partially or fully skimmed milk while Power Sip uses double-toned milk which is not full cream milk or skimmed milk.

The Authority affirmed the AAR ruling on classification and said that flavoured milk is not milk but a beverage containing milk as it was not the natural form of milk but was obtained after the application of specific processes on the milk.

To Read the full text of the Order CLICK HERE

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