Badam Flavoured Milk GST Ruling: Key Insights
The Andhra Pradesh High Court (AP HC) recently ruled that badam flavoured milk falls under the classification of “milk,” attracting a GST of 5%, not 12%. This decision aligns with previous rulings, offering significant relief to dairy businesses and consumers. Let’s break down the ruling, its basis, and its impact on the industry.
🥜 Why the Classification Matters
The core issue revolved around whether flavoured milk falls under:
- Tariff Heading 0402 – Attracts 5% GST.
- Tariff Heading 2202 – Attracts 12% GST.
The AP HC ruled in favour of 0402 after examining the case of Vijaya Visakha Milk Producers. The court stated that adding 0.5% badam flavour does not change the fundamental nature of milk.
📊 Relevant Case Laws & Rulings
- Madras High Court Ruling (Parle Agro): In November 2023, the Madras HC held that flavoured milk remains classifiable under Tariff Heading 0402.
- Customs Tariff Act, 1974: Tariff Heading 0402 covers milk, cream, and even milk with added sugar or sweeteners.
These precedents influenced the AP HC’s decision on December 10, 2024.
📅 Court’s Reasoning
The division bench of Justices R Raghunandan Rao and Maheswara Rao Kunche highlighted:
- Milk with Sweeteners: Tariff Heading 0402 includes milk containing added sugar or other sweeteners.
- Special vs. General Classification: Heading 0402 is a special entry for milk products, while Heading 2202 is a general entry for beverages. Special entries take precedence over general ones.
The court rejected the tax department’s argument that adding badam flavour changes the product’s classification.
🌟 Expert Opinion
Harpreet Singh, Partner (Indirect Tax) at Deloitte, praised the ruling, stating:
“Mere addition of 0.5% badam flavour does not turn flavoured milk into a beverage liable for higher tax. The court rightly upheld the classification under 0402.”
💸 Impact on Businesses
- Lower GST Rate: Dairy businesses will benefit from the lower 5% GST rate.
- Avoid Penalties: Correct classification helps businesses avoid penalties and disputes with tax authorities.
- Consumer Benefit: Lower GST rates may translate to more competitive pricing for consumers.
🛍️ Key Takeaway
The AP HC’s ruling reinforces that badam flavoured milk is, in essence, milk, not a beverage. For businesses dealing in flavoured milk, ensuring the correct classification under Tariff Heading 0402 can save taxes and prevent legal complications.