Badam Flavoured Milk: Why It Attracts Only 5% GST

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:

1. Tariff Heading 0402 – Attracts 5% GST.
2. 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

1. Madras High Court Ruling (Parle Agro): In November 2023, the Madras HC held that flavoured milk remains classifiable under Tariff Heading 0402.
2. 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:

1. Milk with Sweeteners: Tariff Heading 0402 includes milk containing added sugar or other sweeteners.
2. 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.