Softy Ice Cream Mix Classified as Non-Dairy Product Attracting 18 Percent GST

Softy Ice Cream Mix Classified as Non-Dairy Product Attracting 18 Percent GST

The Rajasthan bench of the Authority of Advance Ruling (AAR) has ruled that softy ice cream mix in vanilla flavor is not considered a dairy product and will be subject to an 18 percent Goods and Services Tax (GST). This ruling follows a request from VRB Consumer Products Pvt Ltd regarding the taxability of their vanilla mix powder, which consists of 61.2 percent sugar, 34 percent milk solids (skimmed milk powder), and 4.8 percent other ingredients such as flavoring agents and salt.

According to GST law, food preparations intended for further processing that are meant for human consumption attract an 18 percent tax. This includes preparations containing milk powder, sugar, and various added ingredients, which also fall under the same tax category.

The AAR determined that the product in question cannot be classified as a dairy product. Rajat Mohan, Senior Partner at AMRG & Associates, pointed out that the primary ingredient is sugar rather than milk solids, categorizing it as a processed food item. The ruling highlights that the intended use in soft serve machines, along with additional ingredients like stabilizers and flavoring agents, played a significant role in determining the product's classification.

Contrasting this ruling, Sandeep Sehgal, Partner-Tax at AKM Global, noted that it diverges from a Supreme Court decision regarding 'milk shake mix' and 'soft serve mix' classified as dairy products. This difference illustrates the complexities businesses face in classifying products for GST and emphasizes the importance of ingredient composition and intended use in determining tax liabilities.

The AAR also observed that the combination of ingredients and the processing in soft serve machines significantly contribute to the product's smooth and creamy texture.