Flavoured milk is not milk but a drink containing milk. So pay 12% GST
As per the GST rules, there is no GST on fresh milk, pasteurised milk, curd and lassi. But if you buy flavoured milk, you pay GST of 12%. This is because flavoured milk ”is not milk” but a beverage in which milk is a component.
You may have been counting your blessings all these years since you don’t pay GST on milk and lassi. Even flavoured lassi is out of the GST tax regime, so you might be wondering: why exactly do you pay GST on flavoured milk? Blame the ‘Authority for Advance Ruling’ or the AAR.
Why is GST levied on flavoured milk? As per the GST rules, there is no GST on fresh milk, pasteurised milk, curd etc. If you buy curd, paneer, buttermilk and lassi in pre-packaged and pre-labelled forms, you pay 5% GST.
But if you buy flavoured milk, you pay GST of 12%. This is because flavoured milk ”is not milk” but a beverage in which milk is a component.
Well, if that’s the case you could argue that even flavoured lassi is a drink containing milk, so why should that not be taxed? You wouldn’t argue that since why would you want to pay tax on something that’s not taxable, and when the current situation only saves you money? But even if you don’t question it, these weird rules do not make sense to the common man.
How did this argument begin?
- 1. GST rates and applicability depend on which category the final product is classified into. This classification is done after considering aspects like common parlance, end-use, components, technical specifications and constituents of the product.
- 2.In July 2021, Sampoorna Dairy and Agrotech applied to the AAR to understand GST liability on its products since Sampoorna manufactured and sold lassi in four flavours. In this case, the Authority for Advance Ruling (AAR) ruled that no GST should be levied on lassi or curd. The AAR based its ruling after considering the main ingredients and the process of making the lassi.
- 3.But when Gujarat Cooperative Milk Marketing Federation Ltd applied for a similar clarification, the AAR classified that GST should be applicable to flavoured milk.
- 4. Then Vadilal Ice Cream approached the next higher authority, ie Appellate Authority for Advance Ruling (AAAR) for clarity on the matter.
- 5.Here, the AAAR confirmed AAR’s ruling and said that flavoured milk should be charged GST at 12% because flavoured milk was not a ‘natural form of milk’ but was obtained after the application of specific processes on the milk. It seems like the AAR has considered the contents of the product instead of considering the common parlance.