In re Karnataka Co-operative Milk Producers Federation Ltd. (GST AAR Karnataka)
Milk and Milk products are classified in Chapter 4 and the headings 0401 86 0402 are relevant to Milk / Milk in the form of powder or granules and creme. The product in the instant case is neither milk nor milk powder but ‘Chocolate Milk Powder’, which is admittedly obtained on blending of Whole Milk Powder with Chacolate Flavoured Powder in the ratio of 97.5 to 2.5. Further it is an admitted / undisputed fact that the product in question also does not have the characteristics, required under FSSAI and BIS, to be considered as Milk Powder, in terms of para 7.5 supra. Thus the instant product does not cover under the heading 0401 or 0402. The other remaining headings of Chapter 4 are not relevant to the instant product.
We, now proceed to examine the alternate / competing entry under Chapter 18, which covers cocoa (including cocoa beans) in all forms, cocoa butter, fat and oil preparations containing cocoa. Explanatory Notes of World Customs Organisation to heading 1805 clearly specify that cocoa powder to which milk powder or peptones have been added fall under tariff heading 1806. Heading 1806 covers Chacolate and other food preparations containing cocoa and World Customs Organisation explanatory notes to the said heading clearly specify that the heading 1806 includes all food preparations containing cocoa. The instant product being a food preparation made out of blending of white milk powder with cocoa. Thus the instant product merits classification under heading 1806.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, KARNATAKA
1. M/s Karnatka Co-operative Milk Producers Federation Ltd., (formerly known as Karnataka Milk Federation (KMF)) (called as the ‘Applicant’ hereinafter), having GSTIN number 29AAAAK1110G1Z7, have filed an application for Advance Ruling under Section 97 of the CGST Act, 2017 & KGST Act, 2017 read with Rule 104 of CGST Rules 2017 & KGST Rules 2017, in FORM GST ARA-01, discharging the fee of Rs.5,000/- each under the CGST Act and the KGST Act.
2. The Applicant is an Association of persons and is registered under the Goods and Services Act, 2017, engaged in processing of milk and milk products. They ufacture Skimmed Milk Powder and Whole Milk powder, classify the same under tariff number 0402, taxable at 5% and supply the same to government schools through Zilla panchayaths under “Ksheera Bhagya yojana” scheme as part of the midday meal scheme to school children. Further, at the request of the Government of Karnataka to supply milk powder mixed with chocolate, they also manufacture & supply Chacolate flavoured Whole Milk Powder (Chocolate Milk Powder in short), effective from November 2017, to different schools located in the districts of Mysuru and Bellary region. They classified the said “Chocolate Milk powder” under chapter 1806 and are paying the GST at the rate of 18%.
3. The AG audit, during 2020, has raised an objection on the classification of Milk powder mixed with chocolate powder (Chacolate Milk Powder), saying that even after mixing of chocolate powder into Milk powder, the product will still remains as Skimmed milk powder / whole milk powder and the same has to be classified under chapter 0402 and not under chapter 1806. Thus the applicant has sought advance ruling in respect of the following question:
Whether Chocolate Milk Powder to be classified under HSN 0402 or under 1806 or under any other Chapter?
4. Admissibility of the application : The applicant, filed the instant application, in relation to classification of their product “Chocolate Milk Powder”. Further the applicant has sought advance ruling in respect of the question on the issues covered under Section 97(2)(a) of the CGST Act 2017 and hence the application is admitted.
5. Applicant’s interpretation of law : The Applicant submits their interpretation of law as under:
5.1 Milk Powder, as per the Food Safety and Standards Authority of India (FSSAI), means “Milk product/ s which can be obtained by partial removal of water from milk or cream”. The fat or protein content or both of the milk or cream is adjusted, only to comply with the compositional requirements, in sub item (b) of item 2 of this sub-regulation, by addition or withdrawal of milk constituents in such a way as not to alter the whey protein to casein ration of the milk or cream being adjusted. Products shall be free from added whey and whey preparations.
5.2 Milk Powder should have the following composition specifications.
