Flavored milk is a drink that will be taxed, according to AAAR regulation

Flavored milk is a drink that will be taxed, according to AAAR regulation.

Flavored milk is not milk; it is a drink that contains milk, according to the Appellate Authority of Advance Ruling (AAAR).

Milk is exempt from the goods and services tax, although flavored milk is subject to a 12% tax.

Vadilal, the ice cream mogul, has approached the Supreme Court for clarification.

The firm approached the AAAR after an Authority for Advance Ruling (AAR) stated that GST should apply to flavored milk.

The Gujarat AAAR upheld the AAR categorization finding, stating that flavored milk is not milk but a beverage containing milk.

The AAAR found that the flavored milk was not created naturally, but rather by the application of particular techniques to the milk.

“The classification of items under GST necessitates consideration of factors such as common parlance, end-use, technical requirements, product ingredients, and so on. In this situation, the authorities have prioritized the product’s contents over common parlance “said Harpreet Singh, indirect tax partner at KPMG in India. Surprisingly, every other milk-based food, from curd to lassi, whether flavored or not, is handled equally under the GST structure.

Milk and the delicious yogurt-based drink lassi are both free from GST. However, while flavored lassi is still exempt from GST, flavored milk is subject to a 12% tax. According to tax experts, such judgments are only complicating product categorization under the GST regime.

“Even if flavor is added to milk, most people would still treat it as milk and not as a beverage,” Singh explained.

Previously, numerous AARs decided on the application of the goods and services tax on food items. Parata is not the same as paratha, but naan and a samosa eaten over the counter and on a chair outside the shop undoubtedly tastes different, therefore it should be taxed accordingly.

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