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2019 (11) TMI 1255 - 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 opines that flavoured milk is covered in Chapter 4 of FS to CTA 1974. We examine this aspect. The Section I of FS to CTA 1975 deals with Live Animals; Animal Products. The Chapter 4 deals goods of DAIRY PRODUCE; BIRDS EGGS; NATURAL HONEY; EDIBLE PRODUCTS OF ANIMAL ORIGIN NOT ELSEWHERE SPECIFIED OR INCLUDED . Therefore any items/goods are specified or included elsewhere in the Schedule; those items/goods do not fall under Chapter 4. The applicant stated that flavoured milk is a preparation. Section IV deals with goods of Prepared food stuffs; beverages spirits and vinegar; tobacco and manufactured tobacco substitutes and the Chapter 22 deals with items/goods of Beverages Spirits and Vinegar . The tariff item no. 2202 99 30 covers Beverages containing milk . Thus the 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 HSN code. 2. Determination of the applicable GST rate on flavoured milk. Detailed Analysis: 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 contended that the mere addition of sugar and flavours to milk does not alter its essential character, thus flavoured milk should fall under Chapter 4 of the Customs Tariff Act, 1975, which pertains to dairy produce. Upon examination, the Authority referenced several legal precedents and the Customs Tariff Act. The relevant legal provisions and previous judgments indicated that flavoured milk, due to its preparation process, does not retain the same classification as plain milk. The process involves standardisation of milk, heating, filtration, pasteurisation, homogenisation, and the addition of sugar and flavours, which transforms it into a beverage rather than a simple dairy product. The Authority referred to the Hon'ble Madras High Court's definition of a beverage and the decision in the case of M/s. Ernakulam Reg. Co-Op. Milk Products Union Ltd. vs. CCE, Kochi, which classified flavoured milk under Chapter 22 as a beverage containing milk. The Hon'ble High Court of Gujarat in M/s. KAIRA DIST. CO-OP. MILK PRODUCERS' UNION LTD vs. UOI also supported this classification. Furthermore, the GST Council's 31st meeting clarified that flavoured milk is classifiable under HS code 2202, specifically under tariff item 2202 9930, as a "beverage containing milk." 2. Determination of the Applicable GST Rate on Flavoured Milk: The Authority examined Section 9(1) of the CGST Act, 2017, which mandates the levy of GST on intra-State supplies of goods or services. The applicable GST rates are specified in Notification No.1/2017 - Central Tax (Rate) dated 28.06.2017, which categorizes goods into different schedules with corresponding tax rates. For goods not specified in Schedules I, II, IV, V, VI of the said Notification, Schedule III prescribes a GST rate of 18% (9% CGST and 9% SGST). However, flavoured milk, classified under tariff item 2202 9930, falls under Schedule II, entry no. 50, which specifies a GST rate of 12% (6% CGST and 6% SGST). Conclusion: Based on the detailed analysis of the legal provisions, judicial precedents, and the GST Council's clarifications, the Authority concluded that flavoured milk is classifiable under HS code 2202 9930. The applicable GST rate for flavoured milk is 12% (6% CGST and 6% SGST) as per entry no. 50 of Schedule II of Notification No.1/2017 - Central (Rate) dated 28.06.2017 as amended. Ruling: The HS code for flavoured milk is 2202 9930, and the 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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