Gujarat AAAR Classifies Various Mix and Instant Flours for Their GST Rate

In the case of Kitchen Express Overseas Ltd (GST AAAR Gujarat), M/s Kitchen Express Overseas Ltd (referred to as “the appellant”) submitted an appeal under section 100 of the CGST Act, 2017, and the GGST Act, 2017. This appeal challenged the Advance Ruling No. Guj/GAAR/RJ32/2021, dated July 30, 2021, issued by the Gujarat Authority for Advance Ruling (GAAR).

The appellant is involved in the production and distribution of a variety of flours, including Gota Flour, Khaman Flour, Dalwada Flour, Dahiwada Flour, Dhokla Flour, Idli Flour, and Dosa Flour, marketed under the brand name ‘KITCHEN XPRESS’. These flours are combined with specific spices and sold as instant mix flours that require additional processing before they can be consumed.

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Manufacturing Strategy and Product Composition

The production process starts with the acquisition of food grains and pulses. These are then cleaned, sorted, and milled into flour. Spices are blended into the flour, and the final product is packaged along with a small packet of additional spices for enhanced flavour. These products, known as ‘instant mix flours,’ require additional cooking before they can be consumed, differentiating them from ready-to-eat foods.

The appellant detailed the composition of various flours, noting that they do not contain maize or wheat flour. Therefore, they argue these products should be classified under HSN code 1106, which carries a GST rate of 5% (2.5% CGST and 2.5% SGST). The appellant contended that these instant mix flours are akin to products such as ‘Sattu’ or ‘Chhatua,’ which also fall under HSN code 1106.

GAAR’s Conclusions and Order

The GAAR categorized the products under HSN code 2106 90 (Others), which carries an 18% GST (9% CGST + 9% SGST). This decision was based on examining the product packaging and ingredient list. GAAR observed that the products contain a mix of spices and other ingredients (ranging from 5% to 27%), which are not included in Chapter 1106. Thus, the products do not qualify for classification under Chapter 1106, which means for simpler milling products without significant additives.

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GAAR explained that HSN 2106 encompasses food preparations not specified elsewhere, including a broad spectrum of processed and semi-processed foods. Therefore, it classified the appellant’s products under this heading. GAAR stressed that since the products are marketed as instant mix flours, they should be viewed as food preparations rather than simple flours.

Appellant’s Request and Views

The appellant challenged the GAAR ruling, claiming that their products should be identified as flours rather than instant mix food preparations. They argued that GAAR mistakenly classified their products under HSN 2106 instead of HSN 1102 or 1106. They emphasized that their products are ready-to-cook, not ready-to-eat and that the inclusion of spices and other ingredients should not prevent the products from being classified as flours under HSN 1102 or 1106.

Appellate Authority’s Study

The Appellate Authority reviewed the explanatory notes for HSN codes 1102 and 1106. HSN 1102 includes flours made from cereals other than wheat or meslin, such as rye, barley, oats, maize, and other cereals. HSN 1106 pertains to flour, meal, and powder derived from dried leguminous vegetables, sago, roots or tubers, and products classified under Chapter 8.

The Authority observed that flours with minor additions of certain substances can still be classified under these headings. However, products with substantial additions intended for food preparation do not qualify. The Authority concluded that the appellant’s products, which contain significant amounts of spices and other ingredients, are designed as food preparations. Therefore, these products do not meet the criteria for classification under HSN 1102 or 1106. Due to the extensive additions for creating food preparations, the products appropriately fall under the residual category for food preparations, HSN 2106.

Conclusion: The Appellate Authority affirmed the GAAR ruling, determining that Gota Flour, Khaman Flour, Dalwada Flour, Dahiwada Flour, Dhokla Flour, Idli Flour, and Dosa Flour fall under HSN 2106 90 (Others) and are subject to an 18% GST (9% CGST + 9% SGST). These products are classified as food preparations rather than plain flours because they contain substantial amounts of spices and other ingredients, disqualifying them from the lower tax rate assigned to milling products under HSN 1102 or 1106.