High Court Rules Flavoured Milk as Milk, Not Beverage for GST
In a significant ruling, the Andhra Pradesh High Court has sided with Dodla Dairy Limited, determining that flavoured milk should be classified under GST Tariff Heading 0402 99 90, which attracts a 5% tax rate, rather than under Heading 2202 99 30, which carries a 12% rate. This decision overturns a previous demand by the Additional Commissioner (ST), Tirupati, which had imposed higher taxes on the company.
The dispute centred on the classification of flavoured milk for GST purposes. The tax authorities had argued that flavoured milk falls under Heading 2202 99 30, applicable to "beverages containing milk," thereby subjecting it to a higher tax rate. However, Dodla Dairy contended that their product, consisting predominantly of milk with added sugar and flavouring, should be categorized under Heading 0402 99 90, designated for "milk and cream, concentrated or containing added sugar or other sweetening matter."
The High Court, after reviewing the composition and processing of flavoured milk, concluded that it remains essentially a milk product, despite the addition of flavouring agents. The court emphasized that the product's primary ingredient is milk, and the added Flavors do not transform its fundamental nature. Therefore, it falls appropriately under Heading 0402 99 90, attracting a GST rate of 5% (2.5% CGST and 2.5% SGST) .
This ruling nullifies the earlier demand for differential GST liability amounting to ₹10.3 million for the periods April 2017 to March 2018 and April 2019 to March 2020, along with associated interest and penalties. Dodla Dairy had previously paid ₹7.767 million under protest and is now in the process of claiming a refund for this amount
The court's decision is expected to have broader implications for the dairy industry, providing clarity on the tax classification of flavoured milk products. It underscores the importance of accurate product classification under GST and may influence how similar products are taxed in the future.
Dodla Dairy, established in 1995, is a prominent player in the Indian dairy sector, offering a range of products including milk, curd, butter, ghee, paneer, and flavoured milk. The company operates across multiple states and has a significant presence in both domestic and international markets.
This favourable judgment not only provides financial relief to Dodla Dairy but also sets a precedent that could benefit other dairy manufacturers facing similar classification disputes.
Source : Dairynews7x7 April 28th 2025 Pashu Sandesh