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.
In conclusion, the Supreme Court’s dismissal of the Revenue Department’s appeal reinforces the Andhra Pradesh High Court’s classification of badam-flavoured milk under the 5% GST category, aligning with an earlier ruling by the Madras High Court. This judicial consistency strengthens the argument that flavoured milk, despite added ingredients, retains its fundamental nature as “milk” for tax purposes. Experts now anticipate that the GST Council may reconsider the prevailing 12% levy on all flavoured milk varieties, potentially leading to a more uniform and lower tax rate across the board. This development could offer relief to both consumers and the dairy industry, pending any future decisions by the GST Council.
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A: The Supreme Court dismissed an appeal by the Revenue Department, upholding the Andhra Pradesh High Court’s decision to classify badam-flavoured milk under Entry 0402 9990, which attracts a lower GST rate of 5%.
A: Currently, most flavoured milk is subject to a 12% GST rate. This ruling specifically classifies badam-flavoured milk as “milk” rather than a “beverage,” thus applying the lower 5% rate that is also applicable to pre-packaged and labelled milk products like curd and UHT milk.
A: Experts believe that this ruling, along with a similar decision by the Madras High Court, may prompt the GST Council to review the current 12% GST levy on all types of flavoured milk. There is a possibility that the GST Council might consider a uniform lower rate for flavoured milk in the future, aligning it with other milk products.
