In re M/s Sri Chakra Milk Products LLP. (GST AAR Andhra Pradesh)
What is the rate of GST applicable on outward supply of Flavoured Milk?
‘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.
Read AAAR Order : ‘Flavoured milk’ merits classification under beverage containing milk
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, ANDHRA PRADESH
ORDER
(Under sub-section (4) of Section 98 of Central Goods and Services Tax Act, 2017 and sub- section (4) of Section 98 of Andhra Pradesh Goods and Services Tax Act, 2017)
1 . The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and AP Goods & Services Tax Act, 2017, (hereinafter referred to CGST Act and APGST Act respectively) by M/S Sri Chakra Milk Products LLP., D.No. 23B, Bendapudi vari Street Ramachandra Rao pet, ELURU – 534002 West Godavari District, A.P. (hereinafter referred to as applicant), registered under the Goods & Services Tax.
2. The provisions of the CGST Act and APGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act would also mean a reference to the same provision under the APGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or AP GST Act would be mentioned as being under the GST Act.
3. Brief Facts of the case:
The applicant is registered under GST vide GSTIN – 37ACOFS4636G2ZO. The applicant engaged in manufacturing of milk and milk products including flavoured milk. The applicant seeks clarification regarding the HSN code, and rate of duty on their outward supply of “flavoured milk”.
4. Activities of the applicant:
The applicant informed that;-
(i) Flavoured milk is a sweetened dairy drink made with milk, sugar, permissible colourings and artificial or natural flavourings;
(ii) The brief manufacturing 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 flavours and finally bottling. The applicant provided process flow chart of flavoured milk.
5. Questions raised before the authority:
The applicant had filed an application in form GST ARA-01, dated 13.04.2019 by paying required amount of fee for seeking Advance Ruling on the following issue:
(a) What is the rate of GST applicable on outward supply of “Flavoured Milk”?
On Verification of basic information of the applicant, it is observed that the applicant falls under State jurisdiction, Assistant Commissioner of State Taxes, Eluru Circle.
Accordingly, the application has been forwarded to the jurisdictional officer, Assistant Commissioner (State Tax), Eluru Circle, with a copy marked to the Central Tax authorities, to offer their remarks as per Section 98(1) of CGST/APGST Act 2017. The jurisdictional officers concerned responded that there are no proceedings passed or pending relating to issue on which Advance Ruling is sought by the applicant.
6. Applicant’s Interpretation of Law and Facts:
The applicant is of the view that mere adding bf sugar and different flavours to milk does not change essential character of milk. Flavoured milk or milk shake is consumed as a substitute for milk and it is a simple preparation of milk; no manufacturing process is involved nor does milk changes its composition in any way and classification of flavoured milk falls under Chapter 4 of the Customs Tariff Act, 1975 and sought clarification on the applicable HSN code under the said Chapter by providing extract of the same.
7. Record of Personal Hearing:
Sri. Phani Raja Kumar Boggaram, authorized representative of the Applicant appeared for personal hearing on 16.04.2019 and they reiterated the submission already made in the application.
8. Discussion and Findings:
8.1 We have examined the issue raised by the applicant regarding the HSN code and rate of duty on their outward supply of “flavoured milk”. The relevant legal provisions are discussed here under.
The Section 9 (1) of CGST Act, 2017 is as follows:-
LVEY & COLLECTION
9(1) Subject to the provisions of sub-section (2), there shall be levied a tax called central goods and service tax on al/ intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and such rates, not exceeding twenty percent, as the case may be notified by the Government on the recommendations of the Council and collected in such a manner as may be prescribed and shall be paid by the taxable person.
Under Section 9 (1) of CGST Act, 2017, on the recommendations of the Council, the Central Government notified specifying schedule wise GST rates on goods vide Notification no. 1/2017 – Central Tax (Rate) dated 28.06.2017 ( hereinafter referred to as the “said notification” for brevity) as detailed below:-
(i) 2.5 per cent. in respect of goods specified in Schedule l,
(ii) 6 per cent. in respect of goods specified in Schedule Il,
(iii) 9 per cent. in respect of goods specified in Schedule Ill,
(iv) 14 per cent. in respect of goods specified in Schedule IV,
(v) 1.5 per cent. in respect of goods specified in Schedule V, and
(vi) 0. 125 per cent. in respect of goods specified in Schedule VI
Under Schedule Ill, at entry number 453, it is mentioned that goods which are not specified in Schedules I, II, IV, V, VI of the said Notification attract Central Tax rate of 9%.
The Explanation to the said notification is as follows;-
(i) ………………….
(ii)(a) ……………….
(iii) “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).
(iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification.
From the above, it is evident that the applicable rate of GST is 18% ( 9% CGST and 9% SGST ) on all goods except the goods specified in the schedules I, Il, 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.
8.2 Before applying the said interpretation, we examine the detailed process chart furnished by the claimant in regard to the preparation of “flavoured milk”.
