18% GST on ‘Momylac’ Milk Food & Milk for Babies: AAR Rajasthan

In re Bebymil International Private Limited (GST AAR Rajasthan)

Bebymil International Private Limited, based in Rajasthan, sought an advance ruling regarding the GST classification and applicable tax rates for its product range, particularly “Momylac” infant milk formula.

Applicant’s Profile and Product Range:

• Bebymil International Pvt. Ltd. is a company registered under the Companies Act, 2013, engaged in manufacturing infant milk formula, infant cereals, and protein supplements for children and adults.
• The company’s product portfolio includes a wide range of infant nutrition products, such as Momylac infant formulas (Momylac 1, 2, 3, Premium variants, LBW, L&S Free), infant cereals (Shishulac Rice, Wheat Apple, Wheat Apple Cherry, etc.), and protein supplements for children (Bebymil Junior Chocolate, Vanilla) and lactating women (Mommypro Chocolate, Vanilla).

GST Registration and Trademarks:

• The applicant is registered under the Central/ Rajasthan Goods and Services Tax Act, 2017 (GSTIN: 08AADCL6824D1ZM) and possesses various trademarks for its products.

Nature of Products:

• The principal/dominant item of the applicant is infant milk formula, which serves as a substitute for mother’s milk for infants. The products are designed to meet specific nutritional requirements for different age groups and conditions, such as low birth weight infants and lactose-intolerant babies.
• Detailed descriptions of the products, including their nutritional composition and benefits, were provided by the applicant to support their classification and tax treatment.

Manufacturing Process:

• The manufacturing process involves the formulation of infant milk formula using ingredients such as whole milk powder, whey protein concentrate, soybean fat, lactose, vitamins, and minerals. The products are designed to support various aspects of infant growth and development, including gut health, bone development, brain development, and immunity.

Taxation Issue Raised:

• The applicant sought clarification on the applicable GST rate for their products, particularly “Milk food for babies” and “Milk for babies” marketed under the brand name “Momylac.”
• While the applicant was charging GST at the rate of 18% (9% CGST & 9% SGST/18% IGST) under HSN 19011090, competitors were charging lower rates under different HSN codes, creating confusion.

GST Classification and Applicable Rate:

• The ruling authority analyzed the relevant chapters of the Customs Tariff Act, 1975, to determine the classification of the applicant’s products.
• After examining the manufacturing process and product composition, it concluded that the products should be classified under HSN 19011090, which attracts a GST rate of 18% (9% CGST & 9% SGST/18% IGST).

Ruling and Conclusion:

• The ruling clarified that the GST rate payable by the applicant for the supply of “Milk food for babies” and “Milk for babies” under the brand name “Momylac” is indeed 18% (9% CGST & 9% SGST/18% IGST) under HSN 19011090.
• This ruling provides clarity for the applicant regarding the tax treatment of its products and ensures compliance with GST regulations.

FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, RAJASTHAN

Note 1: Under Section 100 of the CGST/RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling, constituted under Section 99 of CGST/RGST Act, 2017, within a period of 30 days from the date of service of this order.

Note 2: At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / RGST Act would be mentioned as being under the “GST Act”.

The issue raised by M/s. BEBYMIL INTERNATIONAL PRIVATE LIMITED Plot No 70, Road No 8, Udyog Vihar, Near Rajasthan Hospital, Murlipura, Near Chopanki, JAIPUR -302039, Rajasthan (hereinafter “the applicant”) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2)(a) given as under:

(a) classification of goods and services or both;

A. SUBMISSION OF THE APPLICANT(in brief):-

1. That M/s. Bebymil International Pvt. Ltd. (hereinafter referred as Applicant) is a company registered under the Companies Act, 2013 vide CIN:U15130DL2018PTC3375⁴¹ effective from July 2019, having it’s head office at Plot No.70, Road No.8, Udhyog Vihar, Near Rajasthan Hospital, Multipara, Jaipur. The factory of the applicant is at Shade No.21, Greentech Mega Park, Bhadun Road, Roopangarh, Ajmer (Raj.). The main object of the company is to carry on the business of manufacturing, dealing, processing and trading of infant milk formula 0-24 months.

2. That the applicant is also registered under the Central/ Rajasthan Goods and Services Tax Act, 2017 (hereinafter referred as C/RGST Act, 2017) vide GSTIN: 08AADCL6824D1ZM w.e.f. 25.08.2021. The applicant also possess various trademarks for it’s numerous products along with other registrations as are applicable for the time being in force.

3. That the applicant is engaged in the business of manufacturing and trading of infant milk formula, infant cereals, protein supplements for children and adults, dairy whitener, whole milk powder, skimmed milk powder, fat filled powder etc. The principal/ dominant item of the applicant is manufactured in the name of “infant milk formula” which is being used as a substitute to mother’s milk for the infants.

B. INTERPRETATION AND UNDERSTANDING OF APPLICANT ON UESTION RAISED IN BRIEF)

The product portfolio of the applicant contains various food items being used for infants/ children. Some of the items which are being manufactured by the applicant are mentioned hereunder for your kind perusal:

INFANT NUTRITION

1. Infant Formula

Momylac 1 ( Upto 6 Months )

Momylac 2 ( 6 to 12 Months )

Momylac 3 ( 12 to 24 Months )

Momylac Premium 1 ( Upto 6 Months )

Momylac Premium 2 ( 6 to 12 Months )

Momylac Premium 3 ( 12 to 24 Months )

Momylac LBW ( Low Birth Weight) ( 0 to 24 Months )

L & S Free (Lactose & Sucrose Free) ( 0 to 24 Months )

2. Infant Cereals

Shishulac Rice ( 6 to 24 Months )

Shishulac Wheat Apple ( 6 to 24 Months )

Shishulac Wheat Apple Cherry ( 8 to 24 Months )

Shishulac Rice — Wheat ( Apple & Strawberry) ( 10 to 24 Months )

Shishulac Rice — Wheat — Moong Dal ( Carrot — Spinach ) ( 12 to 24 Months )

Shishumil Rice — Moong Dal ( 6 to 24 Months )

CHILDREN PROTEIN SUPPLYMENT

Bebymil Junior Chocolate ( 2 Years and Above )

Bebymil Junior Vanilla ( 2 Years and Above )

METERNAL & LACTATING WOMEN PROTEIN SUPPLYMENT

Mommypro Chocolate

Mommypro Vanilla

This is the complete range of products which are manufactured at the factory of the applicant at Roopangarh, Ajmer, Rajasthan and from there these products are dispatched throughout the country via it’s dealer network.

4. That applicant is submitted this advance ruling to seek clarity on tax rate on it’s principal/ dominant item “infant milk formula” commercially known as “Momylac”. The exact description and other related information of the principal/ dominant item are mentioned hereunder for ready reference :

A. MOMYLAC PREMIUM

a. Momylac Premium provides gut health with good ratio of Whey & Casein.

b. Momylac Premium provides Bone development with Ca : P in 2:1.

c. Momylac Premium provides Brain Development with DHA : ARA in 1:1.

d. Momylac Premium is easy to digest with Lactose and provide Catch up growth with Optimum amount of protein.

e. Momylac premium provides GOS FOS ratio 9:1 which is closer to breast milk, its promotes immunity through gut.

B. MOMYLAC LBW

a. Momylac LBW is a LOW BIRTH WEIGHT & PRETERM INFANT MILK FOMRULA.

b. Momylac LBW provides catch up growth with high energy levels 79 Kcal in 100Ml of milk and 2.1 gm of protein.

c. Momylac LBW provides Bone developments with Ca:P ratio 2:1 and Vitamin D3.

d. Momylac LBW provides Immune development with, Zinc and Vit – C, Vit — B2 and vitamin B12.

e. Momylac LBW provides GI health with 60 : 40 whey casein ratio, dual component of carbohydrate such as lactose and dextrose.

f. Momylac LBW provides Brain development with DHA : ARA in 1:1 and Iron & folic acids.

C. L & S FREE

a. L&S Free Is lactose and sucrose free infant milk formula.

b. When baby gets uneasiness because of:

c. Lactose & sucrose intolerance

d. Diarrhea

e. Abdominal discomforts

f. Persistence diarrhea

g. L&S Free is a milk protein formula , which is CASEIN protein in it.

h. L&S Free is available with ZINC which reduces the episodes of diarrhea.

i. L&S Free is available with MCT which improves digestibility & Palatability.

j. L&S Free is available with LA : ALA which helps in brain development.

k. L&S Free is good in taste better acceptance over soya.

Literature of the product is enclosed with the application in Annexure-C. Sample of the product may be presented at the time of personal hearing.

The above description of product clearly reflects that these are baby milk formulas for different infants and different conditions of the infants.

5. That the production process of the product is also mentioned hereunder for kind perusal:

6. That the applicant, under the influence of one segment of competitors, was forced to charge 9% tax under CGST Act and 9% under the RGST Act and/ or 18% under the Integrated Goods and Services Tax (hereinafter referred as IGST) on Milk for babies under HSN — 1901 1090 under the heading “Other”. Whereas the confusion over the rate being created by the other segment of competitors who are charging 2.5% tax under CGST Act and 2.5% under the RGST Act and/ or 5% under IGST Act on these articles under HSN —4022 2920.

C. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT:-

Q. The applicant is supplying “Milk food for babies” and “Milk for babies” under the trade name of “Momylac”. The rate of tax being charged on these products by the applicates is 18% (9% CGST & 9% SGST/ 18% IGST) under HSN 19011090. Whereat, it appears that the above items fall under the HSN 04021020 and 04022920, receptively, AO’ are taxable @ 5% (2.5% CGST & 2.5% SGST/ 5% IGST). Kindly clarify the rote oft*/ on these items whether these should be taxed at 5% or 18%?

D.PERSONAL HEARING

In the matter, personal hearing was granted to the applicant on 21,02.20211 Mr. Yashasvi Sharma, C.A. Authorized Representative appeared for personal hearing. He reiterated the submission already made by them.

E. COMMENTS OF THE JURISDICTIONAL OFFICER:-

F. FINDINGS, ANALYSIS & CONCLUSION:

1) We have carefully examined the statement of facts, supporting documents filed by the applicant along with the application, oral and written submissions made at the time of hearing and the comments of the Jurisdictional Authority. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts.

2) The applicant is engaged in the business of manufacturing and trading of infant milk formula, infant cereals, protein supplements for children and adults, dairy whitener, whole milk powder, skimmed milk powder, fat filled powder etc. The principal/ dominant item of the applicant is manufactured in the name of “infant milk formula” which is being used as a substitute to mother’s milk for the infants.

3) Presently the applicant is paying GST @18% (IGST) and (9% CGST and 9% SGST) on the aforesaid products manufactured by them but they have sought clarification whether the GST payable is 18% (IGST) and (9% CGST and 9% SGST) or 5% (IGST) and (2.5% CGST and 2.5% SGST).

4) So in the present case we have to decide the classification and applicable rate of GST on the product “Milk food for babies” and “Milk for babies”

5) Before we delve deep to decide the case, it would be proper in the fitment of justice to discuss the relevant provisions of the statute which are as under-

6) Under GST, the applicable rates of CGST are notified by Notification No. 1/2017-C.T. (Rate), dated 28-6-2017 and in terms of explanation (iii) and (iv) to the said Notification,

(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.

7) Thus for the purposes of classification under GST, the First Schedule to Customs Tariff Act is only applicable. Further the first schedule to the Customs Tariff Act, 1975, and the Rules of interpretation therein are to be followed for classifying a product, in terms of Explanation 1 and 2 to Notification No.1/2017-C.T (Rate), dated 28-6-2017.

8) First let us examine the chapter 4 of first schedule of Customs Tariff Act,1975 which is as under-

On going through the chapter 4 we find that it is about Milk and Cream, concentrated or containing added Sugar or other sweetening matter.

10) Chapter 19 of first schedule of Customs Tariff Act,1975 which is as under-

11) On going through this chapter (chapter 19), we find that it deals with Preparations of cereals, flour, starch or milk; pastry cooks’ product.

12) Consequent upon the examination of manufacturing process of product manufactured by the applicant, we find that under chapter 19 it is described that milk product is one of the constituent of the final product whereas Chapter 4 deals with the milk product only. The Principle/dominant item of the applicant is manufacturing of infant milk formula containing cereals, protein supplement etc. which is a substitute to mother’s milk for the infants. Therefore, it is more appropriate to classify the manufactured product by the applicant under HSN 19011090.

13) Since, it is established that the final product manufactured by the applicant is classifiable under 19011090, the rate of GST payable by them in term of Notification No.01/2017 (Central Rate) dated 28.06.2017 is as under-

SCHEDULE III-9%

14. In view of the above, we find that Applicant is required to pay GST 18% (9% CGST & 9% SGST/ 18% IGST) under HSN 19011090 for supply of “Milk food for babies” and

“Milk for babies”.

In view of the above discussion, we rule as under:-

RULING

Question^, the applicant Is supplying “Milk food for babies” and “Milk for babies” under the trade name of “Momylac”. The rate of tax being charged on these products by the applicant is 18% (9% CGST & 9% SGST/ 18% IGST) under HSN 19011090. Whereas it appears that the above Items fall under the HSN 04021020 and 04022920 respectively which are taxable @ 5% (2.5% CGST & 2.5% SGST/ 5% IGST). Kindly clarify the rate of tax on these Items whether these should be taxed at 5% or 18%?

Ans: The rate of GST payable by the applicant for supply of “Milk food for babies” and “Milk for babies” is 18% (9% CGST & 9% SGST/18% IGST) under HSN 19011090.