Rajasthan, October 23:
If you’re a fan of vanilla soft serve ice cream, there’s an important update on how the mix used to make your favorite treat is taxed. The Rajasthan-based Authority for Advance Ruling (AAR) has declared that vanilla-flavored soft serve ice cream mix does not qualify as a milk product and, as a result, will be subject to an 18% Goods and Services Tax (GST).
The Controversy Over Classification
The ruling was brought about after VRB Consumer Products Pvt Ltd sought clarification on the taxation of their vanilla mix, which is sold in powder form. The company argued that the mix, composed of 61.2% sugar, 34% skimmed milk powder, 4.8% flavor enhancers, and other ingredients such as salt, should be classified as a milk product.
However, the AAR rejected this classification. According to the GST Act, food products created through processing, including soft serve ice cream, fall under an 18% tax bracket. This tax rate also applies to key ingredients like milk powder, sugar, additives, and other similar preparations.
The Role of Raw Materials and Processing
The AAR emphasized that while skimmed milk powder is a significant component of the vanilla mix, it doesn’t make the product a milk product. Instead, each raw material in the mix serves a specific role in creating the smooth, creamy texture characteristic of soft serve ice cream. Moreover, the soft texture is achieved not just by the ingredients but also by the specific processing that takes place in the soft serve ice cream machine.
The authority noted that, due to the combination of ingredients and the mechanical process involved, the final product does not meet the criteria to be classified purely as a dairy product. Thus, the vanilla-flavored dry soft ice cream mix, also known as ‘Vanilla Mix,’ will attract an 18% GST.
Implications for Businesses and Consumers
This ruling has significant implications for businesses in the food and beverage sector that rely on vanilla soft serve ice cream. The application of 18% GST means that businesses may need to adjust their pricing to account for the higher tax rate. Consumers could also see a rise in the price of their favorite soft serve ice cream due to this tax burden.
While soft serve ice cream may be a popular treat, its classification and taxation as a non-milk product might come as a surprise to many. The AAR’s decision highlights the complexities of tax laws surrounding food products in India, especially those with a mix of ingredients like dairy, sugar, and flavoring.
What This Means for the Future
The AAR ruling sets a precedent for other products with similar compositions. Companies producing and selling food items made from processed ingredients may need to re-evaluate their tax strategies, ensuring compliance with GST laws. The ruling also serves as a reminder that even products containing a large proportion of milk may not automatically qualify for reduced tax rates if other ingredients and processes are involved.
For now, fans of vanilla soft serve ice cream will have to enjoy their treat knowing that a little more tax is being scooped into the price.
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