Softy Ice Cream Classified as Non-Milk Product, Subject to 18% GST: Authority

The GST authority has declined to categorize softy ice cream as a milk product, stating that its primary ingredient is sugar, not milk. The Rajasthan Bench of the GST Authority of Advance Ruling (AAR) ruled that since sugar, rather than milk, is the main component, softy ice cream cannot be taxed under the 5% GST applicable to milk products. As a result, it will be subject to an 18% GST rate.

A company named VRB Consumer Products had applied to the authority to include its product Vanilla Mix in the category of products with 5 per cent GST. The company said that this product is made from natural milk components and that 5 per cent GST should levied on it. The company sells this product to institutional buyers. They use it to make softy ice cream. The company argued that this mix should be classified under heading 0404, which covers ‘products made from natural milk components’ – whether sugar or sweeteners are added to them or not.

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GST Authority Rules Softy Ice Cream is Sugar-Based

The authority rejected this claim and held that the major component of the product is sugar (61.2 per cent) and not milk solids (34 per cent) which are added to the sugar. Since the product contains 61 per cent sugar, more than a majority, the advance ruling authority concluded that ‘milk solids are added to sugar’ and not ‘sugar is added to milk solids’.

In its decision, the authority said that additives such as stabilisers and flavourings are also added to softy ice cream, which makes it out of the category of ‘natural’ milk products. On this basis, the applicant’s argument to classify the product under ‘milk products’ was rejected. There have been controversies over milk products in the past as well. Earlier, AAR had declared lassi, which is a fermented milk product, free from GST. But 12% GST was imposed on flavoured milk.

As per the Business Standard report, AKM Global, Partner-Tax, Sandeep Sehgal said this ruling stands in contrast to the Supreme Court’s decision in Amrit Foods, where the court classified ‘milkshake mix’ and ‘soft serve mix’ for institutional sales as “dairy produce” under Chapter sub-heading 0404.90.

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