In re TreatsCo. (Sanjay Kumar Gupta) (GST AAR Karnataka)
Summary: The Karnataka Authority for Advance Ruling considered an application filed by TreatsCo, a proprietorship proposing to manufacture and retail kulfi through individual outlets and supermarkets. The applicant explained that kulfi would be prepared by reducing milk through heating, adding sugar and flavouring ingredients, with or without dry fruits, and freezing the mixture. It sought classification under Heading 0404 as a dairy product, arguing that milk and milk solids imparted the essential character of the finished product. Its written submissions contrasted the proposed 5% GST treatment under Heading 0404 with classification under Heading 2105, which it stated attracted 18% GST.
The applicant relied on Parsi Dairy Farm v. Commissioner of Central Excise and Nestle (India) Ltd. v. Commissioner of Central Excise to support a composition-based approach to tariff classification. The Authority examined Heading 0404, which covers whey and certain products consisting of natural milk constituents not elsewhere specified or included, against Heading 2105 00 00, covering ice cream and other edible ice. It reasoned that the manufacturing process produces a processed, ready-to-consume frozen dessert with a distinct commercial identity. Applying the common-parlance approach and the principle that a specific tariff description prevails, the Authority regarded Heading 2105 as more appropriate than Heading 0404.
The Authority distinguished the decisions cited by the applicant, stating that predominance of milk alone could not determine the tariff heading when the finished product was marketed and consumed as a frozen dessert. It also referred to an August 2017 CBIC clarification describing kulfi as classifiable under Heading 2105 and attracting 18% GST. The operative ruling classifies kulfi made from milk and sugar, with or without dry fruits, under Tariff Heading 2105 00 00. The supplied ruling’s operative portion specifies the classification but does not separately pronounce a GST rate.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
M/s. TreatsCo, Sanjay Kumar Gupta Prop. (Herein after referred to as Applicant), 1094, Khata No 63/A, PRESTIGE SHANTINIKETAN, ITPL Road, Mahadevapura, Bengaluru, Bengaluru Urban, Karnataka, 560048, is registered Under GSTIN 29AGPPG9297A1ZX, have filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in form GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act, KGST Act 2017.
Applicant proposes to commence the business of manufacture and retail of “kulfi” to be supplied through individual outlets as well as through supermarkets.
The Applicant submits that kulfi is essentially a milk-based product, prepared by heating milk until it is reduced to approximately 50% of its original volume. Thereafter, sugar, flavouring agents, and other ingredients are added, and the mixture is subsequently subjected to freezing to obtain the final product.
3. In view of the above, the applicant has sought advance ruling in respect of the following questions:
a) Advance ruling is required on HSN code applicable for the Kulfis made of milk and sugar with or without dry fruits.
4. Admissibility of the Application: The Applicant, under Column 13 of Form ARA-01, has selected the following category of issue, namely:-
i. Classification of any goods or services or both.
The question raised by the Applicant falls within the scope of matters specified under Section 97(2) (a) of the Central Goods and Services Tax Act, 2017. Accordingly, the present application is held to be admissible under the said provision.
5. Brief Facts of the Case: – The Applicant submits that kulfi is essentially a product derived from milk, wherein milk is heated and concentrated to approximately 50% of its original volume. Thereafter, sugar, flavouring agents, and other ingredients are added, and the resultant mixture is subsequently frozen to obtain the final product.
The Applicant contends that, having regard to the predominant use of milk as the primary ingredient, the product retains the essential character of a milk-based product. Accordingly, it is submitted that kulfi merits classification under Tariff Heading 0404 00, which covers dairy produce.
6.1 Applicant’s Interpretation of Law: – The Applicant contends that the classification of kulfi merits consideration under Tariff Heading 0404 00, as the product is essentially derived from milk and retains the character of a dairy product.
6.2 In support of the above contention, the Applicant places reliance on the decision in Parsi Dairy Farm v. Commissioner of Central Excise, wherein the Honible Tribunal, vide order dated 01.09.2016, held that the product manufactured by the appellant is classifiable under Chapter heading 0404: dairy constituents” target=”_blank” rel=”noopener”>Chapter Heading 0404 00.
6.3 The Applicant also relies upon the decision in Nestle (India) Ltd. v. Commissioner of Central Excise, wherein the Tribunal examined the classification of products such as Nestle Milkmaid and Kesar Kulfi Mix. After considering the composition of the products, the relevant HSN Explanatory Notes, and the nature of the ingredients, the Hon’ble Tribunal held that such products are appropriately classifiable under Chapter Heading 0404, and not under Chapter 21.
6.4 Further, the applicant has submitted written submissions vide email dated 04.06.2026 may be extracted as follows: –
L Issue for Consideration
The Applicant submitted that the issue for determination is whether Kulfi, being a traditional Indian dairy product predominantly consisting of milk and milk solids, should be classified under Heading 0404 and taxed at 5% GST, or whether it should be classified as “Ice Cream and other edible ice” under Heading 2105 attracting 18% GST.
II. Principles of Classification
The Applicant contended that classification of goods must be determined based on:
a) Composition and essential character of the product;
b) Common parlance understanding;
c) Manufacturing process; and
d) Judicial precedents interpreting similar tariff entries.
It was submitted that where a product derives its essential character from milk and milk constituents and is recognized in trade and common parlance as a dairy product distinct from ice cream, classification under Chapter 4 deserves preference.
III. Kulfi is Distinct from Ice Cream
The Applicant submitted that Kulfi is a traditional Indian dairy product prepared by concentrating milk through prolonged heating, resulting in a dense milk-solid rich product. The distinguishing features stated were:
a) High milk and milk-solids content;
b) Preparation through concentration/ reduction of milk;
c) Absence of aeration or whipping, which is characteristic of ice cream;
d) Dense texture obtained from concentrated milk solids; and
Recognition in trade and common parlance as “Kulfi” and not as “Ice Cream”.
According to the Applicant, the essential character of Kulfi is derived from milk and milk solids and merely because the product is frozen or consumed in a frozen state, it cannot automatically fall under Heading 2105.
IV. Reliance on Parsi Dairy Farm Case
The Applicant relied upon Parsi Dairy Farm v. Commissioner of Central Excise and submitted that the Tribunal emphasized that products predominantly derived from milk and retaining their identity as milk products cannot be classified merely on the basis of the form in which they are marketed. It was argued that the decision supports classification based on the essential dairy character of the product.
V. Reliance on Nestle India Ltd. Case
The Applicant further relied upon Nestle India Ltd. v. Commissioner of Central Excise and submitted that classification must be based on ingredients, composition, character and market identity. It was argued that where a product is specifically covered by an entry based on its composition and character, resort should not be made to a wider or residual classification. Therefore, Kul fi, being essentially a milk product, should not be classified as conventional ice cream merely because it is frozen.
VI. PRECEDENTIAL VALUE OF APPELLATE TRIBUNAL DECISIONS
The Applicant submitted that decisions of the Appellate Tribunal constitute binding judicial precedents for subordinate authorities unless overturned by a jurisdictional High Court or the Supreme Court. It was argued that such decisions can be displaced only by:
1. A contrary judgment of the jurisdictional High Court;
2. A judgment of the Supreme Court; or
3. A statutory amendment altering the legal position.
In the absence of any contrary judgment on the specific issue, the Tribunal’s decisions deserved adherence.
VII. Classification under HSN 0404
The Applicant submitted that Heading 0404 covers products consisting of natural milk constituents and milk-based products not elsewhere specified. It was contended that the Applicant’s Kulfi:
a) Derives its essential character from milk and milk solids; Is manufactured through concentration of milk;
b) Is recognized in trade as a traditional dairy product;
c) Is not comparable to aerated industrial ice cream; and
d) Retains the character of a milk product even after freezing.
Accordingly, classification under Heading 0404 was claimed to be more specific and appropriate than classification under Heading 2105.
VIII. GST Rate Consequence
The Applicant submitted that once classified under Heading 0404, the applicable GST rate would be 5% under the relevant GST rate notification applicable to milk products falling under Chapter 4. It was argued that classification under Heading 2105 and levy of GST at 18% would disregard the product’s essential character, composition, common parlance understanding and judicial precedents.
Prayer
The Applicant prayed that the Authority may:
Hold that Kulfi is classifiable under HSN Heading 0404;
Hold that the applicable GST rate is 5%;
Reject the proposal for classification under Heading 2105 attracting 18% GST;
and
Pass such other order as deemed fit in the facts and circumstances of the case.
In view of the aforesaid judicial precedents and the predominant composition of milk in the product, the Applicant submits that kulfi is appropriately classifiable under HSN 0404.
7. PERSONAL HEARING PROCEEDINGS HELD ON 20.05.2026:
Shri Revenasiddaiah, the Authorised Representative of the Applicant, appeared for personal hearing before this Authority on 20.05.2026 and reiterated the facts and submissions as set out in the application. No additional facts, documents, or further arguments were advanced during the course of the hearing.
FINDINGS & DISCUSSION:
8. At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017 are pari materia and contain identical provisions on all material aspects, differing only in respect of certain specific provisions. Accordingly, unless a particular is made to such dissimilar provisions, any reference to the CGST Act, 2017 shall also be construed as a reference to the corresponding provisions of the corresponding provision of the KGST Act, 2017.
9. We have considered the submissions made by the applicant in the application for advance ruling. We have also examined the issues on which the advance ruling has been sought, the relevant facts of the case, and the arguments advanced by the applicant, including the submissions made by the learned authorised representative during the course of the personal hearing.
10. We have carefully examined the application filed by the Applicant and the submissions made therein. The Applicant contends that kulfi is appropriately classifiable under HSN 0404. Accordingly, the issue that arises for consideration before this Authority is the classification of kulfi, prepared from milk and sugar, with or without the addition of dry fruits, for the purpose of levy of GST.
11. At the outset, it is a settled legal position that the tariff item, sub-heading, heading and Chapter specified in Notification No. 09/2025-Central Tax (Rate) dated 17.09.2025 shall carry the same meaning as assigned to them in the First Schedule to the Customs Tariff Act, 1975. Further, Paragraphs 3 and 4 of the Explanatory Notes to the said Notification stipulate that the Rules for Interpretation of the First Schedule, along with the relevant Section Notes, Chapter Notes and General Explanatory Notes, shall apply, as far as may be, for the purpose of interpretation of the said Notification. Thus, GST classification is aligned with the Harmonised System of Nomenclature (HSN).
11.1 Accordingly, the classification of the impugned product, i.e., kulfi, is required to be determined in terms of the provisions of the Customs Tariff Act, 1975, read with the applicable Rules for Interpretation.
12. In order to examine the above contention as mention supra in para 6, it is necessary to analyse the scope of Heading 0404. The said heading covers:-
“Whey, whether or not concentrated or containing added sugar or other sweetening matter; products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included”
The said heading covers products which are essentially natural milk constituents, such as whey, and other dairy products which retain the basic character of milk and involve minimal or no processing. The expression “not elsewhere specified or included” further restricts the scope of this heading to such products which are not classifiable under any more specific heading.
13. However, the product under consideration, namely kulfi, is not a mere milk ye. The manufacturing process of kulfi involves heating and concentration of milk followed by the addition of sugar, flavouring agents and, in certain cases, dry fruits, fr04, and thereafter subjecting the mixture to freezing. The said process results in the emergence of a new and distinct product having a character, use and identity different from that of milk or its natural constituents.
14. At this juncture, it is relevant to distinguish the nature of products covered under Heading 0404 vis-à-vis the impugned product, as under:-
- Products under Heading 0404 are natural milk constituents and retain the original character of milk
- Such products involve minimal processing and are not transformed into new commercial commodities
- Kulfi, on the other hand, is a processed and ready-to-consume frozen dessert
- The manufacturing process of kulfi involves substantial transformation, resulting in a product with a distinct identity and use
15. It is a settled principle of classification that the essential character and commercial identity of the final product, and not merely the nature of the raw materials used, is determinative. Applying the common parlance test, kulfi is not understood in trade as a milk constituent or dairy product falling under Chapter 04, but is commonly known and sold as a frozen dessert similar to ice cream.
16. In this context, reference is made to Heading 2105 00 00, which covers:-
“Ice cream and other edible ice, whether or not containing cocoa”.
The expression “other edible ice” is of wide import and is intended to cover all frozen edible products of a similar nature. Kulfi, being a frozen, ready-to-eat product consumed in the same manner as ice cream, is appropriately covered under the said heading.
17. Further, in terms of Rule 3(a) of the General Rules for Interpretation, where a product is prima facie classifiable under two headings, the heading which provides the more specific description shall be preferred. In the present case, Heading 2105 00 00 specifically covers frozen edible products, whereas Heading 0404 is a general heading relating to milk constituents. Accordingly, Heading 2105 00 00 is more specific and applicable.
18.1 The Applicant has placed reliance on the decision of the Hon’ble CESTAT in Parsi Dairy Farm v. Commissioner of Central Excise, Mumbai-I and the decision of the Hon’ble Supreme Court in Nestle India Ltd. v. Commissioner of Central case in support of the contention that kulfi merits classification under Heading 4, a product consisting predominantly of milk. We have carefully examined the said decisions and find that the reliance placed thereon is misplaced.
18.2 In the case of Parsi Dairy Farm, the Tribunal examined the classification of kulfi under the competing tariff entries 0404 and 2105 of the Central Excise Tariff. The Tribunal proceeded primarily on the basis that milk constituted the predominant ingredient of the product and held that the addition of sugar, flavouring agents and dry fruits did not alter its essential character as a milk product.
18.3 However, we find that classification cannot be determined solely on the basis of the predominant ingredient used in the manufacture of a product. If such a principle were to be universally applied, even products such as ice cream, frozen desserts and similar preparations, which are largely milk-based, would necessarily merit classification under Chapter 04. Such an interpretation would render Heading 2105, which specifically covers “Ice cream and other edible ice, whether or not containing cocoa”, largely redundant and contrary to the scheme of the tariff.
18.4 It is a settled principle of classification that the identity, character and use of the finished product are of greater significance than the individual ingredients used in its manufacture. In the present case, the product is not marketed, sold or consumed as milk or as a natural milk constituent. Rather, it is known in trade and common parlance as “kulfi”, a ready-to-eat frozen dessert. The process of manufacture involving concentration of milk, addition of sugar and other ingredients, followed by freezing, results in the emergence of a commercially distinct product having a separate name, character and use.
18.5 The Applicant has also relied upon the decision of M/ s Nestle India Ltd. v. Commissioner of Central Excise, We observe that the issue involved in the said case pertained to the classification of milk-based products, wherein the Tribunal examined whether the addition of ingredients such as sugar and vitamins altered the essential character of the products as milk products classifiable under Chapter 04. The findings in the said decision were rendered having regard to the specific nature, composition and characteristics of the products under consideration therein.
In the present case, however, the product under consideration is kulfi, which emerges as a distinct frozen edible product after processing and freezing and is commercially known and marketed as a frozen dessert. Therefore, the facts and circumstances of the said case are clearly distinguishable from those of the present case. Consequently, the ratio of the decision in Nestle India Ltd. does not advance the case of the Applicant.
18.6 It is also pertinent to note that Heading 0404 covers “Whey, whether or not ted or containing added sugar or other sweetening matter; products consist ink of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included.” The expression “not elsewhere specified or included” occurring in the heading is of considerable significance. The said heading is intended to cover products consisting of natural milk constituents only when such products are not covered by a more specific tariff entry elsewhere in the tariff.
18.7 On the other hand, Heading 2105 specifically covers “Ice cream and other edible ice, whether or not containing cocoa.” The expression “other edible ice” is broad in scope and encompasses frozen edible products of a nature similar to ice cream. Kulfi is admittedly a frozen edible product intended for consumption in a frozen state and is consumed in the same manner as ice cream and other frozen desserts.
18.8 Applying the common parlance test, which has consistently been recognised by Courts while determining classification disputes, it is evident that consumers do not purchase kulfi as a milk constituent or dairy ingredient. It is purchased and consumed as a frozen dessert. Therefore, in commercial understanding and market parlance, kulfi is more akin to ice cream and other edible ice than to products consisting merely of natural milk constituents.
18.9 Further, it is a well-settled principle of tariff classification that a specific entry prevails over a general or residuary entry. Once a product is found to be appropriately classifiable under the specific Heading 2105, recourse to Heading 0404 is impermissible, particularly when Heading 0404 itself applies only to products not elsewhere specified or included.
18.10 In view of the above discussion, we are unable to accept the contention of the Applicant that kulfi merits classification under Heading 0404 merely because milk constitutes its principal ingredient. The decisions relied upon by the Applicant are distinguishable on facts and do not advance its case.
18.11 Accordingly, we hold that kulfi is a commercially distinct frozen dessert appropriately classifiable under Tariff Heading 2105 00 00 as “ice cream and other edible ice”, and not under Heading 0404 of the Customs Tariff.
19. Furthermore, it is pertinent to note that the CBIC, vide its clarification issued in August 2017, specifically addressed the issue relating to the classification and applicable GST rate on kulfi and clarified as under:
“Kulfi is classifiable under Heading 2105 and attracts 18% GST.”
The above clarification clearly reflects the understanding of the tax administration regardiing the classification of kulfi under the GST regime. Thus, the issue relating classification of kulfi stood clarified from the inception of GST itself. The ‘on reinforces the view that kulfi is appropriately classifiable under 2105 00 00 and not under Heading 0404, as contended by the Applicant.
20. Accordingly, it is observed that kulfi cannot be regarded as a product consisting merely of natural milk constituents so as to merit classification under Heading 0404. Rather, it is a processed, commercially distinct, ready-to-eat frozen dessert, akin to ice cream and other edible ice, and is therefore appropriately classifiable under Heading 2105 00 00.
21. In view of the foregoing, we pass the following.
RULING
The product “kulfi“, prepared from milk, sugar, with or without the addition of dry fruits, is classifiable under Tariff Heading 2105 00 00 of the GST Tariff
