Supreme Court Confirms 5% GST on Badam-Flavoured Milk

On Friday, the Supreme Court rejected a plea by the Revenue Department challenging a decision by the Andhra Pradesh High Court about GST on badam-flavoured milk. The High Court had ruled that only 5% GST should apply. Therefore, experts think the GST Council might now look into reviewing the tax rate on flavoured milk products.

In the case of Sri Vijaya Visakha Milk Producers Company Ltd, the Andhra Pradesh HC categorised ‘flavoured milk‘ under Entry 0402 9990. This was subject to GST at 5%. Previously, in the case of Parle Agro, the Madras HC also decided that the flavoured milk should fall under HSN 0402, which would be taxed at a GST rate of 5%.

GST is not levied on fresh and pasteurised milk, and other milk products like curd, lassi, buttermilk, and paneer are also exempt from GST if they are sold loose. But if they are sold in pre-packaged and labelled form, they are taxed at 5% GST. UHT (Ultra-High Temperature) milk is also taxed at 5%. On the other hand, condensed milk, butter, ghee, cheese, and flavoured milk attract 12% GST.

The Andhra Pradesh High Court, in December, held that flavoured milk counts as ‘milk‘ and is not a beverage. Therefore, such an item will be taxed at the rate of 5% instead of 12%.

The court looked into whether Entry 0402 applies only to plain milk. It found that this entry includes more than just plain milk. It also covers cream, skimmed milk powder, baby milk food, and even milk with added sugar or sweeteners. This entry included milk and its products. For example, baby milk food is not milk, but it is still classified under 0402. Therefore, the tax department’s suggestion that only plain milk is to be considered as classifying under 0402 is incorrect.

The Andhra Pradesh Court said that flavoured milk cannot be excluded from heading 0402 just because it has 0.5% badam flavour. With this decision, the case seems to be settled in favour of industry for now. Therefore, experts say that companies should make sure that they follow the correct classification with the lower rate.