Whether the goods (Fortified Rice Kernel) manufactured and sold by the applicant will be fall under Chapter-10, Tariff item 1006 as Rice and description of goods 10061090 others (IGST Nil/5%, CGST Nil/2.5%, SGST Nil/2.5%)?
The applicant made a contention in submission that Department has treated ‘Fortified Milk’ on similar footing to normal milk in GST perspective vide Circular No. 52/26/2018-GST dated 09.08.2018. This contention is not tenable as fortified milk is a final consumable product, while FRK is not. The FRK has to be blended with normal rice in ratio 1: 100 and then only gets viable to consume. Further, the structure of milk is not changed because fortified elements like vitamins and other additives are directly mixed in milk which is fit to consume whereas in case of FRK. fortified elements are first mixed in rice flour to manufacture FRK which is further have to be mixed with normal rice.
AAR held that Fortified Rice Kernels FRK manufactured and supplied by the applicant is classifiable under HSN 19049090 and attracts GST @ 18% (SGST 9 % + CGST 9 %).
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING
Note: 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.
a. Classification of goods and /or services or both
e. Determination of the liability to pay tax on any goods or services or both
1. SUBMISSION AND INTERPRETATION OF THE APPLICANT:
♦ Create Fortified Rice Kernels. Blend of Rice Flour & Vitamin-Minerals Premix is Extruded in Shape of rice to form Fortified Rice Kernels
♦ Blend Fortified Rice Kernels with Milled/Traditional Rice in Ration of 1:100.
(The Diagrammatic Chart is also enclosed with the submission. Also, The Process Flow Chart for manufacturing FRK is Attached with the Submission*)
But Currently GST slab applicable on the sale of FRK is not clear to FRK producers.
2. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT
Whether the goods (FRK) manufactured and sold by M/s JVS Foods Pvt. Ltd. will be fall under Chapter-10, Tariff item 1006 as Rice and description of goods 10061090 others (IGST Nil/5%, CGST Nil/2.5%, SGST Nil/2.5%)?
3. PERSONAL HEARING
In the matter personal hearing was granted to the applicant on 14.11.2019 at Room no. 2.29 NCRB, Statue Circle, Jaipur. Shri Sumit Bhargava (Authorised Representative) of applicant appeared for PH. During the PH, he reiterated the submissions already made in the application. Further he requested for another personal hearing to submit more facts. Accordingly, another personal hearing is granted on 20.11.2019. The authorized representative appeared for PH on 20.11.2019 and submitted a copy of invoice wherein the applicant had made a supply of FRK to a firm.
4. COMMENTS OF THE JURISDICTIONAL OFFICER
The jurisdictional officer (Deputy Commissioner, State Tax, Special Circle-7, Jaipur Zone-II, Zonal Kar bhavan, Jhalana Doongri, Jaipur, Rajasthan 302004) has submitted his comments vide letter dated 24.10.2019 which can be summarized as under:
Fortification means deliberately increasing the content of essential micronutrients in a food so as improve the nutritional quality of food and to provide public health benefit with minimal risk to health.
Fortified food means a food as specified under the Food Safety and Standards (Food Products and Food additives) Regulation. 2011. that has undergone the process of fortification as per the provisions of these regulations.
Micronutrients means essential dietary nutrients including vitamins, minerals or trace elements that are required in very small quantities and are vital to development, disease prevention and wellbeing to human beings
Fortified Rice Kernel (FRK): – FRK used for rice fortification is also a value added product made from rice and micronutrient premix.
|S. No||Goods Name||GST Rate||HSN Code||Chapter No.|
|1||Rice other than those put up in unit container and.-
(a) Bearing a registered brand name, or
(b) Bearing a brand name on which an actionable claim or enforceable right in a court of law is available
|2||Rice put up in unit container and.-
(a) Bearing a registered brand name, or
(b) Bearing a brand name on which an actionable claim or enforceable right in a court of law is available (other than those where any actionable claim for enforceable right)
“Milk is classified under heading 0401 and as per S. No. 25 of notification No. 2/2017- Central Tax (Rate) dated 28.06.2017. fresh milk and pasteurized milk, including separated milk, milk and cream, not concentrated nor containing added sugar or other sweetening matter, excluding Ultra High Temperature (UHT) milk falling under tariff head 0401 attracts NIL rate of GS I. Further, as per HSN Explanatory Notes, milk enriched with vitamins and minerals in classifiable under F1SN code 0401. Thus, it is clarified that toned milk fortified (with vitamins A and D) attracts NIL rate of GST under HSN Code 0401
7. GST Council clarified Milk enriched with vitamins or minerals salt (Fortified Milk) would be classifiable under HSN code 0401 as milk, and hence, was exempted from GST. There was a confusion as to fortified milk being a value-added product or Just a vitaminised product kept the FBOs wondering. Initially .the fortified milk was considered as the value-added product and 12% GST was levied on it. But lately it has been concluded that fortified milk is nothing but a vitaminised milk enriched with mineral salts. The GST Council in its recent meeting declared exemption of GST on fortified milk.
|S. No||Goods Name||GST Rate||HSN Code||Chapter No.|
|1||Milk: fresh Milk and pasteurized Milk, including Separated Milk, Milk & cream, not concentrated no containing added sugar or other sweetening matter, excluding ultra high temperature (UTH) Milk||Nil||0401||04|
|2||Milk: Ultra High Temperature (UTH) Milk||5%||0401||04|
|3||Milk: Condensed Milk||12%||04029110,
5. FINDINGS, ANALYSIS & CONCLUSION
The relevant entry of rice in chapter 10 is as below-
|1006 10||– Rice in the husk (paddy or Rough)|
|1006 10 10||— Of seed quality|
|1006 10 90||— Other|
|1006 20 00||– Husked (brown) rice|
|1006 30||– Semi-milled or wholly-milled rice, whether or not polished or glazed :|
|1006 30 10||— Rice, parboiled|
|1006 30 20||— Basmati rice|
|1006 30 90||— Other|
|1006 40 00||– Broken rice|
While going through the above classification of Rice under Chapter 10, we find that rice in natural form and some of the preparation/processing on rice like husking, milling, parboiling etc. are only included in above said chapter.
The chapter note of chapter 10 also mentions that only certain works such as polishing, glazing etc. are covered in it. The relevant extract of said chapter note is as below-
(A) The products specified in the headings of this Chapter are to be classified in those headings only if grains are present, whether or not in the ear or on the stalk.
(B) The Chapter does not cover grains which have been hulled or otherwise worked. However, rice, husked, milled, polished, glazed, parboiled or broken remains classified in heading 1006.
In view of above, we find that rice in its natural form with its essential characteristics as intact is classified in Chapter 10, and FRK is not covered in the said chapter.
Another characteristic feature of FRK is that it cannot be consumed in itself but only when it is mixed with normal rice in defined proportion. Whereas, the products classified in Chapter 10 are eatable/ consumable after boil and do not require any other admixing. Both these differentiations do not allow its classification in Chapter 10.
4. For the purposes of heading 1904, the expression «otherwise prepared” means prepared or processed to an extent beyond that provided for in the headings of, or Notes to, Chapter 10 or 11.
The above note comprehensively puts the process or preparation of rice which are beyond the scope of chapter 10, to be included in Chapter heading 1904. While going through the submissions, it is clearly evident that normal rice has undergone specific mechanical and chemical processing resulting in to FRK. This preparation/process of FRK is way beyond the scope mandated under Chapter 10 of GST Tariff (i.e. husked, milled, polished, glazed, parboiled or broken). Therefore, though FRK is shaped in form of rice by the mechanized process but it is not rice grain in terms of Chapter 10.
|Chapter/ Heading/ Sub-heading / Tariff item||Description of Goods||Unit||GST Rates|
|1904||Prepared foods obtained by the swelling or roasting of cereals or cereal products (for example, corn flakes); cereals[other than maize(corn)] in grain form or in the form of flaked or other worked grains (except flour, groats and meal), precooked or otherwise prepared, not elsewhere specified or included|
|190410||-Prepared foods obtained by the swelling or roasting of cereals or cereal products|
|19041010||– – – Corn flakes||Kg||9%||9%||18%||Nil|
|19041020||– – – Paws, Mudi and the like||Kg||Nil||Nil||Nil||Nil|
|19041030||– – – Bulgur wheat||Kg||9%||9%||18%||Nil|
|19041090||– – – Other||Kg||9%||9%||18%||Nil|
|19042000||– Prepared foods obtained from unroasted cereal flakes or from mixtures of unroasted cereal flakes and roasted cereal flakes or swelled cereals||Kg||9%||9%||18%||Nil|
|19043000||– Bulgur wheat||Kg||9%||9%||18%||Nil|
|19049000||– Other||Kg||9%||9%||lo /o||Nil|
On examining the above classification of chapter heading 1904, we find that FRK is classifiable under HSN 19049000 of GST Tariff as other and attracts GST@ 18% (SGST 9 % + CGST 9 %).
6. In view of the foregoing, we rule as follows: –
Fortified Rice Kernels FRK manufactured and supplied by the applicant is classifiable under HSN 19049090 and attracts GST @ 18% (SGST 9 % + CGST 9 %).