Jigarthanda, a popular milk-based beverage sold in Tamil Nadu, will attract 12 per cent GST, the State’s Authority for Advance Ruling (TNAAR) ruled.
The main ingredients that go into the making of Jigarthanda are milk, almond pisin, basundi, ice cubes and sherbet. At present, fresh milk and pasteurised milk are fully exempt from GST. Further, milk products like curd, lassi, buttermilk and paneer are also exempt from GST if sold in a form other than pre-packaged and labelled. GST at the rate of 5 per cent applies to curd, lassi, buttermilk and paneer, when sold in pre-packaged and labelled form, and Ultra High Temperature (UHT) Milk. Further, a GST of 12 per cent applies to condensed milk, butter, ghee and cheese.
Madurai-based Madurai Famous Jigarthanda LLP, one of the manufacturers of the product with a brand name said it is packed in unit containers and is also available in loose form/in bottles without sealing. The firm said that its final product is not fermented but a pasteurised milk product. Further it was submitted that GST is being levied at 5 per cent. The firm moved to TNAAR to find whether the product manufactured as pasteurised milk and milk cream but named ‘Jigarthanda’ can be classified as Jigarthanda under description of goods? Also, there was the question of whether this good was taxable or exempted and if taxable then what would be the rate and HSN (Harmonised System of Nomenclature)
Based on all the facts presented and arguments made, TNAAR first categorised the said product as a good. Then it took note of explanation given along with HSN to examine whether the said product can be classified a beverage. It said that ‘milk and cream’ referred to in HSN 0402 and Jigarthanda manufactured by the applicant are not the same and on this ground it means that the said product will not attract a GST of 5 per cent. The next issue was about categorising the product as a beverage.
The word ‘beverage’, though not defined under the CGST Act, 2017, in common parlance, it is considered as a drink that can be consumed directly. The said product can be consumed directly and hence is a beverage with a base of milk. Further, based on the explanation it is clear that milk flavoured with cocoa or other substances are specifically excluded from Chapter heading 0402 (GST at the rate of 5 per cent) and included under Chapter heading 2202 (GST at the rate of 12 per cent). Accordingly, it ruled that Jigarthanda will attract GST at the rate of 12 per cent.
Commenting on the ruling, Harpreet Singh, Partner with KPMG India said classification of flavoured milk had been a matter of perennial litigation even during erstwhile tax regime. “Authorities allege higher rate of tax by classifying flavoured milk under ‘beverage containing milk’ instead of ‘milk and cream” attracting a lower tax rate. Determination of HSN classification of goods is a subject of technical nature which requires deeper understanding of the product, its ingredients, characteristics, end-use and common parlance,” he added.