The Rajasthan Authority of Advance Ruling (AAR) has held that Vanila flavour Softy Ice Cream Not Dairy Product and 18% GST is levied.
The bench of Mahipal Singh and Mahesh Kumar Gowla has ruled that the preparations consisting of milk powder, sugar and any other added ingredients are also included under Heading 2106. Powder for table cream, jellies, ice-cream and similar preparations, whether or not sweetened, are also included in Heading 2106. It is also evident that the softy ice-cream cannot be termed as a dairy product.
Table of Contents
Background
The applicant, VRB Consumer Products Private Limited is a company and intends to manufacture and supply dried softy ice cream mix (low fat) in vanilla flavour (Vanilla Mix) at its manufacturing unit (factory). Vanilla Mix will be sold in packages not exceeding kg to institutional buyers, who will use the same to produce soft serves using softy making machines. Further, Vanilla Mix will not be sold through confectionery outlets.
Issue Raised
The applicant sought the advance ruling on the issue as to the rate of tax and classification of dried softy ice cream mis (low fat) in vanilla flavour under Notification No. 1/2017-Central Tax (Rate) dated 28.6.2017.
Relevant Provisions – Softy Ice Cream Not Dairy Product
Chapter 4 of the First Schedule to the Tariff Act is meant for ‘Dairy Produce etc.’ which is part ofSection I which broadly covers ‘Animal Products. According to Chapter Note 5 of Chapter 4 this Chapter does not cover products obtained from milk by replacing one or more of its natural constituents (for example. butyric fats) b another substance (for example, oleic fats) (heading 1901 or 2106). Thus, it is evident that if a product is covered by heading 1901 or 2106 the same shall not be covered under Chapter 4 of the First Schedule to the Tariff Act.
Chapter 21 of the First Schedule to the Tariff Act covers ‘Miscellaneous edible preparations’ and the said Chapter is part o f the broad head o f Prepared food stuffs. beverages, spirits and vinegar’ under Section IV ofthe First Schedule to the Tariff Act. Thus, according to the broad scope of different sections of t h e First Schedule to the Tariff Act, “prepared foodstuffs and beverages” are clearly distinguishable from “products of animal origin”, the basic difference being the nature of products in question.
While Chapter 4 covers products of animal origin which means that the products are normally natural or near natural in their nature and not much processing has been done thereupon, Chapter 21 covers prepared foodstuffs which means that those items of animal origin have been subjected to some processing which and the resultant product has acquired the nature of being prepared foodstuff, etc.
Conclusion – Softy Ice Cream Not Dairy Product
The AAR noted that the softy ice-cream which the applicant proposes to manufacture is obtained by a process of manufacture which involves not only processing of liquid milk to obtain milk solids but also the further process to which different ingredients such as sugar, stabilisers, anti-caking agents and flavouring agents are subjected along with milk solids. Thus, the process of manufacture as described by the applicant involves manufacture of an edible preparation which can be broadly termed as prepared foodstuff or beverages etc.
The AAR noted that the multi-stage process adopted by the applicant to obtain the proposed product and use of various distinct items in the said process to obtain the desired edible preparation is the key factor that should determine the classification of the product to be manufactured by the applicant.
The AAR held that the product i.e. “Vanilla Mix” – dried s o f t ice cream mix (low fat) in vanilla flavour is classifiable under Heading 2106 90 99 of the First Schedule to Tariff Act attracting tax at the rate of 9% of CGST and 9% of SGST.
Ruling Details
Applicant’s Name: M/s VRB Consumer Product Pvt Ltd.
Date: 31/07/2024
