2026 (2) TMI 459 - AAR - GST

Masala Paan classification as mixed supply, not composite; classed under HSN 2106 9099 and taxed at 18%.

Masala paan is held to be a mixed supply because none of its constituent ingredients functions as a principal supply: all ingredients are equally ... Composite supply - principal supply - mixed supply - natural bundling - Section 2(30) composite supply - Classification of Masala Paan for GST tariff purposes - rules of interpretation of the First Schedule to the Customs Tariff Act - Whether Supply of ‘Masala Pan’ is a Composite Supply with Principal Supply as Betel Leaf and other components as ancillary supply? - HELD THAT:- In the present case, all the ingredients are equally necessary and it is not that particular one of them is a Principal supply. Therefore, we cannot say that this is a composite supply where the supply of betel leaf is a principal supply. Each of these items can be supplied separately and is not dependent on any other item. Hence Masala paan is not a naturally bundled product. Also, as mentioned by the proponent, he wishes to supply the Masala Paan to various states of India & even outside India. Considering the perishable nature of the product (best before 24 hours) the proponent may have to supply each item separately and not in a bundled form. Which further confirms that masala paan is a mixed supply where no supply is principal supply. It can be seen that the Masala paan is mixture of about 9 ingredients which are essential ingredients of the final produce i.e. masala Paan. All the ingredients have specific importance for the specific taste of Masala paan. Hence masala paan is a mixed supply and not a composite supply. As seen from above table, 8 out of 9 ingredients have GST tax rates of 5%, 12% and 18%. Also, the customer pays more price for Masala paan than betel leaf or sadha paan. The additional cost is for the additional ingredients added to betel leaf. Thus, it has an impact on the final price of Masala paan. Thus, Considering the proportion of taxable items in the final product, the Masala paan should be taxed as per the definition of the Mixed Supply. On careful examination of different entries under Chapter 21, a quest for appropriate classification rests finally at 2106 9099, the residual entry, as the product itself does not find specific place anywhere else in the Chapter 21. We thus conclude that the impugned product viz, ‘Masala Pan’ or ‘Meetha Pan’ would merit classification as ‘Miscellaneous Edible Preparation’ under Chapter Heading 2106 9099. Thus, we hold that the product ‘Masala Paan’ is a classifiable under HSN 2106 9099 and chargeable to tax at the rate of 18% under entry No. 23 of schedule III of Notification 1/2017-CT(R). Whether Supply of ‘Masala Pan’ is a Composite Supply with Principal Supply as Betel Leaf and other components as ancillary supply. - Answered in the Negative. Issues: (i) Classification of Masala Paan for GST tariff purposes; (ii) Whether supply of Masala Paan is a composite supply with betel leaf as the principal supply.Issue (i): Classification of Masala Paan for GST tariff purposes.Analysis: Applicable classification rules include the First Schedule to the Customs Tariff Act, 1975 and Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017. The product is a perishable edible preparation composed of multiple ingredients whose individual identities dissolve into a single consumable product. Chapter 21 of the First Schedule covers miscellaneous edible preparations, with a residual catch-all subheading under tariff item 2106 9099 for edible preparations not specified elsewhere. Precedent administrative rulings addressing similarly composed sweetmeat/edible preparations support classification under the residual entry.Conclusion: Masala Paan is classifiable under tariff item 2106 9099 (Miscellaneous Edible Preparations) and is chargeable at 18% as per Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017.Issue (ii): Whether supply of Masala Paan is a composite supply with betel leaf as the principal supply.Analysis: The statutory test for composite supply requires (inter alia) that one component constitute the principal supply to which others are ancillary and that the supplies be naturally bundled and supplied in conjunction in the ordinary course of business (Section 2(30), Section 2(90) and related provisions of the Central Goods and Services Tax Act, 2017). In the present product the ingredients are combined to create a distinct final product whose identity does not reduce to a single predominant ingredient; the consumer purchases the final product as a whole. The characteristics show the ingredients form an integrated edible preparation rather than separately supplied goods with one dominant principal supply.Conclusion: Supply of Masala Paan is not a composite supply with betel leaf as the principal supply; the proposition that betel leaf is the predominant element is rejected.Final Conclusion: The product Masala Paan is a single, classifiable miscellaneous edible preparation under tariff item 2106 9099 and is not a composite supply with betel leaf as principal supply; taxation follows classification under Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017.Ratio Decidendi: A multi-ingredient edible preparation whose ingredients combine into a distinct final product that is ordinarily supplied and consumed as one integrated item is classifiable under the residual tariff entry for miscellaneous edible preparations (2106 9099) and does not qualify as a composite supply with a single predominant principal supply where no component predominates in identity or economic purpose.