• Source:JND
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The GST authorities have determined that soft-serve ice cream does not qualify as a dairy product because its primary component is sugar, not milk. The Rajasthan bench of the Advance Ruling Authority for GST concluded that soft-serve ice cream should be taxed at 18%, rather than the 5% GST rate applicable to dairy products.

This decision comes after VRB Consumer Products applied for taxation under the 5% GST category for dairy products on the vanilla mix used in the production of VRB Consumer Products soft-serve ice cream.

The business maintained that the vanilla mix was produced with natural dairy components and should be classified under heading 0404, which includes items produced with dairy components, whether or not sweeteners are added.

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The AAR, however, dismissed the business’s claim, noting that the product contained 61.2 per cent sugar compared to 34 per cent milk solids. According to the authority, a high sugar content means “milk solids are added to the sugar,” not the other way around, which disqualifies the product from being classified as a dairy product.

The ruling also mentioned the addition of stabilizers and flavourings to soft-serve ice cream, which further distinguishes it from being considered a natural dairy product. As a result, the AAR asserted that the product should continue to be taxed at the higher rate of 18% GST.

The case is part of a larger debate concerning the classification of dairy products. In the past, the AAR exempted fermented dairy products like lassi from GST but imposed a 12% tax on flavoured milk. Sandeep Sehgal, partner-tax at AKM Global, pointed out that the verdict differs from an earlier Supreme Court decision in the Amrit Foods case, which classified comparable “milkshake mix” and “soft serve mix” sub-dairy products under heading 0404.90.

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(With PTI's Input)