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Dear experts
'Cake gels' as food additives and premixes are used in bakery industries to improve the quality, texture and aeration of sponge cakes. Cake gel being a functional additive used in bakery applications. It is not a flavouring,emulsifier, or stand alaone bakery item.
What is the HSN and rate of GST on such cake gels ? Also indicate supporting AARs, if any.
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Is it suggestible to adopt 18% GST, if classified under HSN 2106 which reads as under?
Food preparations not elsewhere specified or included [other than roasted gram, sweetmeats, batters including idli/dosa batter, namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, khakhra, chutney powder, diabetic foods]
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HSN 1704 90 90 GST@ 18%
Glaze Gels is covered under Chapter 1704 90 90 i.e. Others, of the GST Tariff and falls under Sr. No. 12 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 as amended from time to time, attracting 18% GST.---------AAR Maharashtra |
Ok Sirji.
However the Tamil Nadu AAR rendered in M/s. Adyar Ananda Bhavan Sweets India Pvt Ltd has classified "cake gel" under HSN 2106 attarcting 18% GST.
My query : Which is the precise HSN, as it covers different products with different functions/marketability although with 18% GST?
Dear Sir Ji,
Although GST rate is the same under both Chapter/Heading/Sub-headings, yet correct classification is an absolutely must for all purposes.
I shall revert after thorough study on the issue.
Classification and GST Rate on Cake Gels under GST Law
Cake gels, being functional food additives used in bakery applications to improve texture, aeration, and quality of sponge cakes, are classifiable under HSN 2106, which covers "Food preparations not elsewhere specified or included." These products are not standalone bakery items, flavourings, or emulsifiers, nor do they qualify as sugar confectionery or ready-to-eat preparations under Chapter 17.
This classification is supported by the ruling of the Authority for Advance Ruling, Tamil Nadu, in the case of M/s. Adyar Ananda Bhavan Sweets India Pvt Ltd, which held that cake gel falls under HSN 2106 and attracts 18% GST as per Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28.06.2017, as amended.
While the Maharashtra AAR in Healthy Life Foodtech Pvt. Ltd - 2022 (12) TMI 511 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. classified glaze gels under HSN 1704, such classification pertains to ready-to-consume sugar-based preparations and does not apply to cake gels, which are used as industrial bakery inputs.
Applying the General Interpretative Rules (GIRs) under the Customs Tariff (which are applicable to GST tariff interpretation), particularly Rule 1 and Rule 3(b), cake gels are best described by their essential character and use as food preparations, not elsewhere specified. They do not merit classification under Chapter 17 (sugar confectionery) or Chapter 35 (glue/proteins).
Therefore, classification under HSN 2106 with 18% GST is legally accurate, commercially appropriate, and supported by AAR precedents. It is advisable to adopt and continue with this classification to maintain legal defensibility and compliance with tariff interpretation norms.
CLASSIFICATION UNDER RESIDUARY ENTRY
Both HSNs are under Residuary Entries. No specific entries in this context. It is worthwhile to go through the judgements of Hon’ble Supreme Court:-
(i) COLLECTOR OF C. EX. Versus JAYANT OIL MILLS PVT. LTD. - 1989 (3) TMI 132 - SUPREME COURT
Classification of goods - Residuary entry - Interpretation of statute (Tariff) - More specific items to be preferred to one less so.
- The basic rule of construction is that a more specific item should be preferred to one less so. [para 18]
(ii) BHARAT FORGE & PRESS INDUSTRIES (P) LTD. Versus COLLECTOR OF C. EX - 1990 (1) TMI 70 - SUPREME COURT
Classification of goods under residuary Entry - Criteria. -
Under a residuary entry only such goods are covered which cannot be brought under the various specific entries in the tariff. In other words unless the Department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items, resort cannot be had to the residuary item. [para 3]
(iii) Benefit of doubt to be given to the assessee
Adjudication - Classification of goods - Where two opinions are possible, assessee should be given benefit of doubt and the opinion favourable to it should be given effect to - Sections 11A(2) and 33 of Central Excise Act, 1944 - Rule 173B of Central Excise Rules, 1944. Para No.15
in the case of POULOSE AND MATHEN Versus COLLECTOR OF CENTRAL EXCISE - 1997 (2) TMI 98 - SUPREME COURT
(iv) BURDEN OF PROOF FOR SPECIFIC ENTRY IS CAST ON THE REVENUE---Supreme Court in the case of CCE Vs. Calcutta Steel Industries -1988 (10) TMI 43 - SUPREME COURT
PRINCIPLES OF CLASSIFICATION OF GOODS
(1) "When an expression is not defined in the Act, natural and ordinary meaning of such expression must be kept in view".-----Supreme Court in the case of CC Vs. Gujarat Perstorp Electronics Ltd. 2005 (8) TMI 657 - SUPREME COURT (SC 3 member bench )
(2) " Headings and Sub-headings in Central Excise Tariff should be understood not in strict technical sense but in their popular sense i.e. the meaning assigned to them by those trading and using the product"- Supreme Court in the case of Kedia Agglomerated Marbles Vs. CCE 2003 (1) TMI 104
To be continued.
(i) "The mental association with a product is highly important for classification. The consumer buys an article because it performs a specific function for him".----Supreme Court in the case of Atul Glass Industries Pvt. Ltd. Vs. CCE reported as 1986 (7) TMI 90 - SUPREME COURT.
(ii) "Basic character, function and use is more important than name used in trade parlance".-----Supreme Court in the case of CCE Vs. International Tobacco 2008 (9) TMI 66 - SUPREME COURT.
(iii) If entries in HSN and tariff are not aligned, reliance cannot be placed on HSN for the purpose for the purpose of classification of goods".-------Supreme Court in the case of Camlin Ltd. Vs. CCE 2008 (9) TMI 1 - Supreme Court
(iv) End use to which product is put is not determinative of classification. Statutory fiscal entry, basic character, function and end use of product are relevant factors". ----------------Supreme Court in the case of CCE Vs. Carrier Aircon Ltd. 2006 (7) TMI 8 - SUPREME COURT
To be continued
PRINCIPLES OF CLASSIFICATION OF GOODS
(1) Classification of goods - End use not entirely irrelevant.-------Supreme Court in the case of COLLECTOR OF CUSTOMS Versus KUMUDAM PUBLICATIONS (P) LTD. - 1995 (12) TMI 82 - SUPREME COURT
- "It may not be entirely correct to say that in the case can the end use or function of the goods is relevant on the question of classification. A Three Judge Bench of this Court has relied upon the function and end use also in determining the classification in 1994 (9) TMI 70 - Supreme Court. [para 5]".
(2) An exemption notification cannot change classification of goods------Supreme Court in the case of ESKAYEF Limited Vs CCE -1990 (9) TMI 72 - SUPREME COURT.
(3) Product literature cannot be sole basis for classification.-------Supreme Court in the case of ESPL Industries Vs. CCE-- -1995 (3) TMI 107 - Supreme Court
(4) The burden of proof that a particular product is classifiable under a particular tariff head is on the Revenue and must be discharged by proving that it is so understood by the consumers of product in common parlance ---- CCE Vs. Vicco Laboratories -2004 (12) TMI 92 - SupreME COURT-member bench
As per my understanding, "Cake gels" does not fall under any specific category of HSN, It will be covered under Sr no. 23 of schedule III of Notification no. 1/2017 (R), Food preparations not elsewhere specified or included [other than roasted gram, sweet meats, batters including idli/dosa batter, namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, khakhra, chutney powder, diabetic foods] which will fall under HSN code 2106 and therefore taxable @18%.
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