Infant milk formula products classified under HSN 19011090 attracting 18% GST instead of dairy products classification

AAR Rajasthan ruled that infant milk formula products marketed as milk food and milk for babies under trade name Momylac are classifiable under HSN 19011090 rather than HSN 04021020 and 04022920. The authority determined that since the products contain cereals, protein supplements, and serve as mother's milk substitute, they fall under Chapter 19 (food preparations) rather than Chapter 4 (dairy products). Consequently, the applicant must pay 18% GST under HSN 19011090 for these infant formula products.

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Issues Involved:
1. Classification of goods and services or both.
2. Applicable rate of GST on "Milk food for babies" and "Milk for babies."

Summary:

Issue 1: Classification of Goods and Services or Both

The applicant, M/s. Bebymil International Pvt. Ltd., engaged in the business of manufacturing and trading infant milk formula, infant cereals, protein supplements for children and adults, dairy whitener, whole milk powder, skimmed milk powder, and fat-filled powder, sought clarity on the classification and applicable GST rate for their principal product, "infant milk formula" (Momylac).

The applicant argued that the product should fall under HSN 04021020 and 04022920, which are taxable at 5% (2.5% CGST & 2.5% SGST/5% IGST). However, they were currently charging 18% (9% CGST & 9% SGST/18% IGST) under HSN 19011090 due to market confusion.

Issue 2: Applicable Rate of GST on "Milk Food for Babies" and "Milk for Babies"

Upon review, the Authority for Advance Ruling (AAR) examined the relevant provisions of the GST Act and the Customs Tariff Act, 1975. They noted that Chapter 4 of the Customs Tariff Act pertains to "Milk and Cream, concentrated or containing added sugar or other sweetening matter," while Chapter 19 covers "Preparations of cereals, flour, starch or milk; pastry cooks' products."

The AAR concluded that the applicant's products, which include cereals and protein supplements, are more appropriately classified under HSN 19011090. This classification aligns with "Preparations suitable for infants or young children, put up for retail sale," as described in Chapter 19.

Conclusion:

The AAR ruled that the applicable GST rate for the applicant's "Milk food for babies" and "Milk for babies" is 18% (9% CGST & 9% SGST/18% IGST) under HSN 19011090, as per Notification No. 1/2017-C.T. (Rate), dated 28-6-2017.

Ruling:

The rate of GST payable by the Applicant for the supply of "Milk food for babies" and "Milk for babies" is 18% (9% CGST & 9% SGST/18% IGST) under HSN 19011090.

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