2023 (2) TMI 1024 - AAR - GST

Karnataka AAR rules frozen RTE and RTC food products for institutional supply fall under HSN 2106, attracting 18% GST rate instead of claimed 12%

In Re: M/s. SATS Food Solutions India Private Limited,

Karnataka AAR held that frozen food products manufactured for institutional supply, including Ready To Eat (RTE) and Ready To Cook (RTC) categories, are ... Classification of goods - business of manufacture/production and supply of frozen food in institutional packs to companies in Aviation Industries, quick service restaurants, Hotels etc., across Ready To Eat (RTE)/ Ready To Cook (RTC)/ Processed and Semi Processed categories - classifiable either under HSN Code 2007 or under HSN Code 2106 90 99- other food preparation not elsewhere specified or included and is liable to GST at the rate of 12% or at the rate of 18% of Schedule II and Schedule III of Notification No.01/2017-Central Tax (Rate) dated 28-06-2017? HELD THAT:- The Applicant is into manufacture of ready to eat (RTE) food, which are processed food products that are pre-cleaned, precooked, packaged but not ready for consumption without thawing, heating, reportioning, and repacking. The Applicant is also into manufacture of ready to cook (RTC) food, which are processed food products which need post manufacturing preparation like thawing, cooking, and addition of vegetables / protein at institutional buyer's end. Since the applicant is into manufacture of ready to eat and ready to cook food products, the same are covered under explanation 5(b) which is preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption. Thus the food products manufactured by the applicant are covered under tariff heading 2106 and hence exigible to GST at 18% (CGST 9% and SGST 9%) as per entry No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28.06.2017. Issues Involved:1. Applicable GST rate on the products manufactured by the applicant.Detailed Analysis:Admissibility of the Application:The application is admissible under Section 97(2)(e) of the CGST Act, 2017, as it pertains to the 'determination of the liability to pay tax on any goods or services or both.'Brief Facts of the Case:1. Applicant's Business: The applicant is engaged in the manufacture and supply of frozen food in institutional packs to companies in various sectors, including Aviation Industries, quick service restaurants, and hotels. The products fall under Ready To Eat (RTE), Ready To Cook (RTC), Processed, and Semi Processed categories.2. Product Details: The products are supplied in bulk to businesses, not retail customers, and are not fit for immediate human consumption without further processing. The products have a long shelf life and are stored at very low temperatures.Applicant's Interpretation of Law:1. Classification and Tax Rate: The applicant believes that the food items are classifiable under HSN Code 2007 or HSN Code 2106 90 99 and are liable to GST at 12% or 18% as per Schedule II and III of Notification No.01/2017-Central Tax (Rate) dated 28-06-2017.2. Nature of Service: The applicant asserts that their services are not in the nature of restaurant services, which attract a lower GST rate of 5% without input tax credit (ITC). They emphasize that their supplies are in bulk to B2B clients and not directly to end consumers.Findings & Discussion:1. Legal Provisions: The provisions of the CGST Act and KGST Act are similar, and the classification of products follows the Customs Tariff Act, 1975. The relevant tariff heading for the applicant's products is 2106, which covers miscellaneous edible preparations.2. Classification: The products fall under the category of 'preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption' as per the explanatory notes to tariff heading 2106.3. Applicable GST Rate: The products are classified under tariff heading 2106 and are subject to GST at 18% (CGST 9% and SGST 9%) as per entry No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28.06.2017.Ruling:The food products manufactured by the applicant are subject to GST at 18% (CGST 9% and SGST 9%) as per entry No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28.06.2017.