The Supreme Court on Friday dismissed an appeal by the Revenue Department against a ruling by the Andhra Pradesh High Court on 5 per cent GST on badam-flavoured milk. Based on this, experts believe the GST Council may consider reviewing the levy on flavoured milk.

The Andhra Pradesh High Court, in the case of Sri Vijaya Visakha Milk Producers Company Ltd, classified ‘flavoured milk’ with almonds (badam) under Entry 0402 9990, attracting GST at 5 per cent. Earlier, the Madras High Court, in the case of Parle Agro, also held that flavoured milk should be classified under HSN 0402 and would thus attract GST at 5 per cent.

Fresh milk and pasteurised milk are fully exempt from GST. Further, milk products like curd, lassi, buttermilk, and paneer are also exempt from GST if sold loose, but attract 5 per cent GST when sold in pre-packaged and labelled form. Ultra-High Temperature (UHT) milk also attracts 5 per cent GST. Additionally, a GST of 12 per cent applies to condensed milk, flavoured milk, butter, ghee, and cheese.

In December, the Andhra Pradesh High Court ruled that badam-flavoured milk is not a beverage but is classifiable under a specific entry as ‘milk’. This means such a product will attract GST at the rate of 5 per cent, not 12 per cent. The court examined whether only plain milk is to be treated under Entry 0402. The entry not only enumerates milk per se but also includes cream, skimmed milk powder, milk food for babies, etc. It even covers plain or concentrated milk containing sugar or other sweetening matter.

This entry clearly incorporates milk and milk products. For example, milk food for babies, by normal standards, is not milk. However, it is treated as falling under 0402. Thus, the test propounded by the tax department — that only plain milk is to be treated as falling under 0402 — is incorrect, the Andhra Pradesh High Court had said. “Though the entry speaks only of milk containing added sugar or other sweetening matter, flavoured milk cannot be taken out of tariff heading 0402 merely because of the addition of 0.5 per cent badam flavour,” it said.

Source : The Hindu businessline