Flavoured milk is not milk but a beverage containing milk. Hence liable for 12% GST : AAAR Rules

The present appeal has been filed u/s 100 of the CGST Act, 2017 against the order passed by AAR.

The appellant has sought Advance Ruling on the following question

“What would be the classification of ‘Flavoured Milk’?”

The appellant submitted that they are producing flavored milk under the trade name of “Power Sip”. As per the appellant such flavoured milk merits classification under Heading 04029990 of the GST Tariff. The appellant submitted that adding flavors to milk does not change essential character of milk. The product namely flavoured milk is milk only and is sold, purchased and consumed as milk in trade and amongst consumers. Therefore their product is classifiable under HSN Code 04029990 as the milk. 

The appellant in the ground of appeal has submitted that the GAAR erred in overlooking the fact that the product in question was milk itself, and not a beverage containing milk or a beverage based on milk.

Held by AAAR:

The main issue here is to decide the classification of the product viz. flavored milk.

The appellant, have in their submission stated that flavored milk is milk itself not beverages containing milk and is classifiable under Chapter 0402 instead under Chapter 2202 as held by GAAR.

Chapter Note 1 to Chapter 4 of the Customs Tariff Act, 1975 reads as under:

1. The expression “milk” means full cream milk or partially or completely skimmed milk.

The relevant explanatory note of Customs Tariff Heading 0402 as per HSN is given below:

This heading covers milk (as defined in Note 1 to this Chapter) and cream, concentrated (for example, evaporated) or containing added sugar or other sweetening matter, whether liquid, paste or solid (in blocks, powder of granules) and whether or not preserved or reconstituted.

Milk powder may contain small quantities of starch (not exceeding 5% by weight) added, in particular, to maintain the reconstituted milk in its normal physical state.

The Heading does not cover:

(a) Curdled, fermented or acidified milk or cream (heading 04.03).

(b) Beverages consisting of milk flavoured with cocoa or other substances (heading 22.02).

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Advance Ruling

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Classification of Goods

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