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Flavoured milk is not milk but a drink; to be taxed: AAAR ruling

The Appellate Authority of Advance Ruling (AAAR) has said that flavoured milk is not milk; it is in fact a drink that has milk as an ingredient. Milk is still not under the range of goods and services tax, but flavoured milk attracts 12% tax.

The ice cream major, Vadilal, had come up to the apex appellate authority for clarity on the matter. The company had approached the AAAR after an Authority for Advance Ruling (AAR) had said that GST should be applicable on flavoured milk.

The Gujarat AAAR confirmed the AAR ruling on classification and said that flavoured milk is not milk but a beverage containing milk. The AAAR ruled that the flavoured milk is not the natural form of milk but was obtained after the application of specific processes to the milk.

Remarkably, every other milk-based product, from curd to lassi, whether flavoured or not, is treated on a par under the GST framework.

Under the GST framework, both milk and the sweet yogurt-based drink lassi are exempt from any tax. But, while flavoured lassi continues to remain outside the GST gamut, flavoured milk attracts 12% tax.

Tax experts say the product categorization under the GST framework is only becoming complicated due to such rulings. Even if flavour is added to milk, under common parlance, most would still treat the product as milk and not as a beverage. “This plea was not accepted by the authorities,” said Singh.Earlier, too, several AARs have ruled on the goods and services tax applicable on food items. Parata is not similar to paratha but naan, and a samosa eaten over the counter and on a chair outside the shop probably tastes different, so it should be taxed differently.

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