On Flavoured milk, different Authorities for Advance Rulings (AARs) of different states have a clash over GST rates. While on one side, Gujarat AAR followed the ruling of Tamil Nadu, AAR, and Andhra Pradesh, AAR held the GST at the rate of 12% on flavoured milk; Contrarily, Karnataka, AAR has chosen 5 percent GST on flavoured milk.
The rulings with respect to Gujarat are related to the 2 well-known milk product brands: Amul and Vadilal. Gujarat Cooperative Milk Marketing Federation Ltd, which is an owner of the Amul brand, approached AAR to get a ruling regarding GST on its flavoured milk product that is sold under the name of ‘Amul Kool Cafe/Amul Kool’. A similar question was submitted before AAR by Vadilal for flavoured milk product it produces that is being sold under the name of ‘Power Sip’.
Submission to Gujarat AAR & its Rulings
Gujarat Co-operative submitted/presented to the Gujarat AAR that the process of the flavoured milk includes within its purview the standardisation of fresh milk as per the fat contents. Thereafter, it is heated at a fixed temperature that is followed by filtration, pasteurisation and homogenisation and then sugar is mixed and various flavours and finally bottling.
Gujarat AAR concluded in Amul’s case that flavoured milk shall be covered under tariff item/HSN (Harmonised System of Nomenclature). HSN is an accepted system (globally) for application of tariff as per custom duty and GST, ‘04029990’ which means the GST rate applicable 
Consequently, AAR, Gujarat passed the ruling that the GST rate of 5% shall be on flavoured milk.
The Ruling of Vadilal Reversed the Decision
In the case of Vadilal, a similar reasoning was given. The applicant, Vadilal, submitted the following arguments:
- National Dairy Research Institute, Bangalore has also verified/confirmed that flavoured milk falls within the purview of Dairy produce.
- The applicant, Vadilal, also highlighted/referred to a ruling by Karnataka AAR which ruled that ‘flavoured milk’ is categorised as per the Tariff heading 04029990 which means GST at the rate of 5 per cent.
- Gujarat AAR also took note of the judgment given by Allahabad High Court in Gujarat Cooperative Milk Marketing Federation wherein it was concluded that the ‘flavoured milk’ is one of the forms of milk, and it is neither a derivative of milk nor a milk product.
Gujarat AAR after considering all the facts and circumstances reached the conclusion that this matter was presented before the GST Council 
Nevertheless, the Fitment Committee (It is the committee of tax officials that recommend rate classification which is then considered by the GST Council) did not favour the proposition which was accepted by the GST Council.
“AAR also considered the rulings by Tamil Nadu’s AAR (in the case of Britannia Industries) and Andhra Pradesh’s AAR (in the case of Tirumala Milk and Sri Chakra Milk) and accordingly held that ‘flavoured milk’ is classifiable under Tariff Item 2202 9930 of the First Schedule to the Customs Tariff Act, 1975 as a ‘beverage containing milk’.” This means the GST rate would be 12 percent.
Dual Tax Positions
As per Harpreet Singh, Partner at KPMG, the above-mentioned case is another example of diverse tax positions that is being followed by the States. Whereas three AARs have given the ruling of the imposition of a 12 percent tax on flavoured milk, Karnataka AAR has held it to be 5 percent. “There cannot be a more compelling reason for constituting a National level Advance ruling authority, for providing tax certainty, he said.”
