It was carried by the Andhra Pradesh High Court that badam-flavoured milk is not counted as a beverage however it is categorized under a particular entry as milk. The case shows another categorization issue under the goods and services tax (GST) regime that reached the courts and baffled both the dairy industry along the assessees.
According to the court ruling Badam flavoured milk will draw a GST rate of 5 per cent rather than 12 per cent.
Previously it was carried by the Madras HC in the Parle Agro matter last November, in which it carried that the flavored milk should be categorized under Tariff Heading 0402 of the Customs Tariff Act, 1974.
This category makes it obligated to Central Tax at 2.5% (5% after adding SGST at 2.5%) under Entry 8 of the First Schedule of Notification No. 1/2017-CT(Rate) on June 28, 2017.
The Andhra Pradesh High Court on December 10 repeated it laying the ruling of the Madras HC that badam-flavoured milk is not a beverage though is categorized under the specific entry for ‘milk.’
The concern was that the flavoured milk must be placed under Tariff Heading No. 0402 99 90 (commonly referred to as 0402) or 2202 99 30 (commonly referred to as 2202). The category shall be determined if it draws GST at 5% or 12%.
Under category 0402 the applicant, Vijaya Visakha Milk Producers, filed a return. But the tax department has rejected the same classification as wrong and asked for a penalty.
A division bench of Justices R. Raghunandan Rao and Maheswara Rao Kunche while disposing of the petition re-examined that merely milk counts under 0402. The same entry comprises milk, cream, skimmed milk powder, milk food for babies, and even plain or concentrated milk that has sugar or other sweetening matter.
The bench noted that the finding of the first respondent (tax department) that ‘flavoured milk’ proceeds out of this entry via the addition of badam flavour could not be accepted. But the entry speaks just about milk that has added sugar or other sweetening matter, flavoured milk cannot be taken out of Tariff Heading 0402 just due to the addition of 0.5% Badam flavour.
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Also, the court marked that sweetened milk when packaged and bottled for sale shall be counted under the category of milk that has added sugar or other sweetening matter under 0402.
The drink can be regarded as a beverage that has milk under 2202, as per bench- “The entry under 0402 is the special entry, and the entry under 2202 is the general entry, which would have to give way to entry 0402. The same principle would apply to flavoured milk,” similar to the Madras High Court ruling.
As per the ruling of The Hon’ble Andhra Pradesh High Court flavoured milk falls under the GST classification of ‘milk and cream’ (Entry 0402 9990) with a 5% GST rate, instead of ‘beverages including milk’ (Entry 2202 9930) with a 12% GST rate, sets an influential precedent for the food and beverage industry. The ruling is within another ruling of the Madras High Court in the case of Parle Agro and considers the characteristics of the product. The same decision reinforces the clarity of the classification of such products.
Therefore via laying on the precedent set in the Parle Agro matter, the decision of the Andhra Pradesh High Court furnishes the required clarity on the classification of products assuring a lower tax obligation for businesses selling flavored milk.
| Case Title | M/s. Sri Vijaya Visakha Milk Producers Company Ltd Vs. Asst. Commissioner Of Central Tax and Others |
| Citation | WRIT Petition No: 254/2024 |
| Date | 10.12.2024 |
| Counsel For Appellant | A Sarveswar Rao |
| Counsel For Respondent | GP For Commercial TAX (AP) Santhi Chandra (Jr. Standing Counsel for CBIC) Y V Anil Kumar (Central Government Counsel) Y N Vivekananda |
| Andhra Pradesh High Court | Read Order |
