Flavoured milk classification under Chapter 22 determines GST treatment as a beverage containing milk.

Flavoured milk, after standardisation, heating, filtration, pasteurisation, homogenisation, addition of sugar and flavours, and bottling, was treated as a prepared ready-to-drink product rather than plain milk. Applying the tariff interpretation rules and the GST rate notification, the AAR held that Chapter 4 did not apply because the product is specifically covered under Chapter 22 as a beverage containing milk. On that basis, flavoured milk was classified under tariff item 2202 9930, and the corresponding GST rate was held to be 12%.

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Issues: Whether flavoured milk is classifiable under Chapter 4 of the Customs Tariff or under tariff item 2202 9930 as a beverage containing milk, and what GST rate applies to such supply.

Analysis: The ruling applied the GST rate notification read with the interpretation rules of the First Schedule to the Customs Tariff Act, 1975. It noted that flavoured milk undergoes standardisation, heating, filtration, pasteurisation, homogenisation, addition of sugar and flavours, and bottling, so it is a prepared product rather than plain milk. Relying on the tariff scheme, Chapter 4 was held inapplicable because the product is expressly covered elsewhere, and Chapter 22 was found to include beverages containing milk. The reasoning also drew support from the treatment of flavoured milk in prior excise and tariff references, and from the GST Council material indicating classification under HSN 2202.

Conclusion: Flavoured milk was held classifiable under tariff item 2202 9930 as a beverage containing milk, not under Chapter 4, and the applicable GST rate was held to be 12%.

Ratio Decidendi: A product that is milk subjected to processing and flavoured as a ready-to-drink preparation is classifiable as a beverage containing milk under Chapter 22 when the tariff scheme specifically covers that description, and the corresponding GST rate follows that classification entry.

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