Vanilla-flavored dried soft ice cream mix classified under Heading 2106 90 99, attracts 18% GST

The AAR, Rajasthan ruled on the classification of vanilla-flavored dried soft ice cream mix. The applicant sought classification under Heading 0404, but the authority determined the product falls under Heading 2106 90 99. The ruling emphasized that the product comprises multiple ingredients requiring further processing in soft serve machines to achieve the final texture. As a food preparation intended for human consumption requiring additional processing, and not qualifying as a dairy product, the mix attracts 9% CGST and 9% SGST under the applicable tariff classification.

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Issues Involved:

1. Classification of "Vanilla Mix" under the appropriate tariff heading.
2. Determination of the applicable rate of tax for "Vanilla Mix."

Issue-wise Detailed Analysis:

1. Classification of "Vanilla Mix":

The applicant, VRB Consumer Products Private Limited, sought an advance ruling on the classification of their product, "Vanilla Mix," which is a dried softy ice cream mix (low fat) in vanilla flavor. The applicant proposed that the product should be classified under Heading 0404 of the Customs Tariff Act, 1975, which covers "products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included." The applicant emphasized that milk solids, which constitute 34% of the product, are the essential ingredient, thereby justifying classification under Heading 0404.

However, the Authority for Advance Ruling (AAR) found that the product contains 61.2% sugar, making sugar the major ingredient. Additionally, the product includes other ingredients such as stabilizers, anti-caking agents, and natural flavoring substances, which contribute to the product's identity and functionality. The AAR observed that the product is intended for use in making soft serves, which involves further processing in a soft serve machine, indicating that the product is a prepared foodstuff rather than a natural dairy product.

The AAR concluded that the product does not fall under Heading 0404, which is meant for products of animal origin with minimal processing. Instead, the AAR determined that the product falls under Heading 2106, which covers "Miscellaneous edible preparations," including powders for ice-creams and similar preparations. The classification under Heading 2106 is appropriate given the product's composition and intended use.

2. Determination of the Applicable Rate of Tax:

The applicant contended that the product should attract a tax rate of 2.5% under Heading 0404. However, based on the classification under Heading 2106, the AAR ruled that the product "Vanilla Mix" attracts a GST rate of 18%, comprising 9% Central GST (CGST) and 9% State GST (SGST). This decision aligns with the provisions of Notification No. 1/2017-Central Tax (Rate) dated 28.6.2017, which prescribes the tax rates for various goods under the GST regime.

Conclusion:

The Authority for Advance Ruling concluded that the "Vanilla Mix" is classifiable under Heading 2106 90 99 of the First Schedule to the Tariff Act, attracting a GST rate of 18% (9% CGST and 9% SGST). The ruling emphasized the product's nature as a prepared foodstuff, which involves significant processing and a mixture of ingredients beyond natural milk constituents.

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