Fortified milk classified under HS code 0401 as milk, exempted from GST

 The Goods and Services Tax (GST) Council, in its recently held 28th meeting, clarified that milk en…

 The Goods and Services Tax (GST) Council, in its recently held 28th meeting, clarified that milk enriched with vitamins or minerals salt (fortified milk) was classifiable under HS code 0401 as milk, and hence, would now exempted from GST.

Earlier, there was confusion amongst the food business operators (FBOs) about the category of the fortified milk and the rate of GST applicable on it. Fortified milk was considered as a value-added product, and therefore, 12% GST was levied on it.

R S Khanna, chairman, Kwality Ltd, said, “We have made several representations to the government saying that it is nothing but vitaminised milk and not a value-added product per se. We are happy that the government has reacted positively to this, as it was just fortified milk, as additional minerals and vitamins were added to the milk.”

Besides, five per cent GST will be applicable on both treated (modified) tamarind kernel powder and plain (unmodified) tamarind kernel powder, while beet and cane sugar, including refined beet and cane sugar, which fall under heading 1701, will attract five per cent GST. The earlier rate was 12 per cent.

Further, the FBOs have now been exempted from GST on services provided by FSSAI. These include the processing of their applications for licensing, registration and other work related to clearances to operate. Since it was levied at 18 per cent earlier, this was a big relief to the FBOs, particularly those in the micro-, small and medium enterprises (MSME) sector.

Chaired by acting finance minister Piyush Goel, the Council, in a statement, stated that the hotel industry had been given a major relief by computing the rate of tax on accommodation service on the basis of the transaction value instead of the declared tariff.

Reacting to the move, Dilip Datwani, president, Hotel and Restaurant Association of Western India (HRAWI), said, “This is a welcome move. GST rate on declared tariff was incorrect and caused confusion for guests. We greatly appreciate the move and thank the GST Council for bringing about the much-needed reform.”

The GST was mandated to be levied on the published tariffs or the declared tariffs on hotel rooms. However, hotels are known to offer discounts on room tariffs to patrons, resulting in changes in the declared rates, which could correspond to a different GST rate as per the prescribed rate slabs on room tariffs.

While 18 per cent GST is applicable for room tariffs ranging between Rs 2,500 and Rs 7,500, tariffs of Rs 7,500 and above attract 28 per cent GST.

The decisions are slated to commence from July 27, 2018.