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Lassi exempt from GST, but not flavoured milk: AAR

Lassi exempt from GST, but not flavoured milk: AAR

The AAR ruled that the goods are classified as Lassi at HSN 040390 and are exempt from GST. However, due to the complexities in classification, AAR benches have held in the past that flavoured milk is not exempt from GST

The ruling comes in a recent case where Sampoorna Dairy and Agrotech had approached it on the applicable GST rate The ruling comes in a recent case where Sampoorna Dairy and Agrotech had approached it on the applicable GST rate

The Gujarat Authority of Advance Ruling (AAR) on Monday ruled that lassi, a fermented milk product, is exempted from Goods and Service Tax (GST). The ruling comes in a recent case where a Valsad-based manufacturer and supplier, Sampoorna Dairy and Agrotech, had approached it on the applicable GST rate.

The Valsad-based dairy sold lassi under the brand name ‘Elan’ in four flavours including plain (with no sugar or salt added), salted with cumin, strawberry sweetened with sugar, and blueberry sweetened with sugar. The AAR bench noted that the main ingredients of the lassi that was being manufactured and sold were curd, water and spices.

The contents of the subject goods displayed on the bottle showed the ingredients printed as pasteurized toned milk, spices, pudina, green chilli, ginger, salts, active culture, added nature-identical flavour and stabiliser. Moreover, the bottle displayed that it was a ‘dairy-based fermented drink.’

The AAR ruled that the goods are classified as lassi at HSN 040390 and are exempt from GST. However, due to the complexities in classification, AAR benches have held in the past that flavoured milk is not exempt from GST.

Fortunately for the manufacturer, and the end consumer, curd, lassi and buttermilk come under a specific classification of HSN 040390 and are exempt from GST. This, however, does not apply to flavoured milk, with tax experts noting that manufacturers and suppliers of flavoured milk have not been as lucky.

Further, the Gujarat AAR itself, in a case pertaining to Amul, which manufactured and supplied flavoured milk (made of milk added with sugar and permitted flavours) had ruled that a GST rate of 12% would be applicable (HSN 22029930). “In essence, both lassi and flavoured milk are dairy-based drinks, but the classification codes treat them differently,” said a tax expert.

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