Fortified Rice Kernels and Fortified Milk, classified as ‘otherwise prepared’, 18% GST Applicable: AAR [Read Order]

The Rajasthan Authority for Advance Ruling (AAR), in its advance ruling, ruled that the Fortified Rice Kernels (FRK) and Fortified milk are classified as ‘other’ and it doesn’t fall under the purview of Chapter 10 of GST tariff therefore 18% GST wherein the rate of 18% GST is divided into 9% of Central Goods and Service Tax (CGST) and 9% State Goods and Service Tax (SGST) is made applicable.

M/s JVS Food Private Limited is an applicant who is engaged in food production and is the largest producer of institutional food in the state of Rajasthan. The applicant has adopted the strategy of food fortification so as to check the nutrient value of the food to prevent malnutrition and this strategy is utilized globally. Further, this producer undertook the procedure of rice fortification and milk fortification. The rice fortification involves 2 steps namely:

1. FRK is created with the help of the mixture of rice flour and vitamin-mineral premix is extruded in the shape of rice.
2. Noe the blend of Fortified Rice Kernels (FRK) is mixed in the ratio of 1:100 with that of the traditional rice.

Hence, the issue raised in this case was whether Fortified Rice Kernels (FRK) and Fortified milk will be taxable under Chapter 10 of GST Act which pertains to the natural form of any product or not?

The bench comprising of J.P. Meena, member of Central Tax and Hemant Jain, Member of state tax stated in the ruling that Fortified Rice Kernels (FRK) and Fortified milk are classified as ‘other’ and it doesn’t fall under the purview of Chapter 10 of GST Act therefore 18% GST on the following rationale:

1. In the process of fortification of rice and milk, the essential characteristics are changed, further, in the case of Fortified Rice Kernels (FRK) its property is changed from granule to flour.
2. The preparations on rice and milk both are beyond the ambit of Chapter 10 of GST Tariff. However, it can be charged under Chapter 19 of GST tariff i.e. otherwise prepared.