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January 19, 2021

Despite various products of instant flour mixes falling in different subheadings, the GST rate is the same at 5% – AARl mixes

by CA Shivam Jaiswal in GST

Despite various products of instant flour mixes falling in different subheadings, the GST rate is the same at 5% – AAR

GST as a whole having vast coverage, it sometimes gets really strenuous to figure out the classification of services provided, what rates will apply so as to there is certainty in tax liability. An issue was recently raised before the Gujarat AAR regarding classification of mixed flour which was used for preparing instant farsan or eatable like Khaman, Gota and Handwa mix. Let us refer to the case of Dipakkumar Kantilal Chotai (Talod Gruh Udyog) (GST AAR Gujarat), where issue was raised regarding classification of varied types of mixed flour.

Facts of the Case:

  • The applicant was a proprietorship firm and was one of the leading and highly reputed companies in the field of selling mixed flour which is used for preparing various Indian dishes.
  • The applicant manufactures mixed flour which was used for preparing instant farsan or eatable and a special mention can be made of Khaman, Gota and Handwa mix which was accepted in the market as a product leader.
  • He was in the business of manufacturing and selling of varied types of mixed flour under the ‘Talod’ brand name that were used to prepare instant Farsan and other similar dishes.
  • According to the applicant, ready to mix/instant mix was a flour of grains and pulses mixed with spices and condiments, that recipe for preparing farsan/eatables was printed on the packet of product and by following the direction of recipe, farsan/eatables could be prepared instantly after adding such other ingredients as required.

Issue raised by the applicant before AAR

The applicant has put forward the following question for which Advance Ruling is to be sought:

  • Whether, mix flour was classified under Tariff item 1106 vide Entry No.59 of Schedule-I of Notification No.01/2017- Central Tax (Rate) dated 28.06.2017 and Notification No.01/2017-State Tax (Rate) dated 30.06.2017, Notification No.01/2017-Integrated Tax (Rate) dated 28.06.2017.
  • Whether, Chutney Powder mentioned above in Sr.No.18 in above table can be classified under Tariff item 2106 vide Entry No.100A of Schedule-I of Notification No.01/2017- Central Tax (Rate) dated 28.06.2017 and Notification No.01/2017-State Tax (Rate) dated 30.06.2017, Notification No.01/2017-Integrated Tax (Rate) dated 28.06.2017.
  • If not, whether, Mixed flour and Chutney Powder were to be classified in any other Schedule Entry as per Rate Notification or Exemption Notification
  • Should Chutney powder when supplied with Gota Mix flour and Bhajiya Mix flour, be considered as Composite Supply having HSN of principal supply i.e., 1106 and 5% GST should apply or not

Observations of AAR of classification of mix flour

  • As per Rule 3(b), mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which could not be classified by reference to 3(a), should be classified as if they consisted of the material or component which gives them their essential character, in so far as the criterion is applicable.
  • Accordingly, all the mix flour products mentioned had the essential characters of leguminous flour and therefore would be classifiable under sub-heading 11061000 of the First Schedule to the Customs Tariff Act, 1975(1 of 1975).
  • AAR held that Khaman mix flour, Gota mix flour, Handvo mix flour, Dahi vada mix flour, Dalwada mix flour, Meduvada mix flour, Pudla mix flour, Moong bhajiya mix flour, Chorafali mix flour, Bhajiya mix flour, Dhokla mix flour, Idli mix flour, and Dosa mix flour are classifiable under sub-heading 11061000 of the First Schedule to the Customs Tariff Act, 1975.
  • They appeared at Entry No.59 of Schedule-I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 and the GST liability on all these products is 5% GST. “Upma mix flour, Rava idli mix flour and Muthiya mix flour are classifiable under sub-heading 23023000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).
  • Whereas, Khichu mix flour is classifiable under sub-heading 23024000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).
  • They appear at Entry No.103A of Schedule-I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 and the GST liability on these products is 5% (2.5% CGST + 2.5% SGST).

Observations of AAR of classification of chutney powder

  • AAR further added that Chutney powder is classifiable under Sub-heading 21069099 of the First Schedule to the Customs Tariff Act, 1975(1 of 1975).
  • The said product appeared at Entry No.23 of Schedule-III of Notification No.01/2017- Central Tax (Rate) dated 28.06.2017 till 14.11.2017 and at Entry No.100A of Schedule-I of the said notification with effect from 15.11.2017.
  • The GST liability on the said product was 18% (9% CGST + 9% SGST) up to 14.11.2017 and 5% with effect from 15.11.2017.
  • The supply of Gota Mix and Chutney powder would be considered as a ‘mixed supply’ of goods and will be considered as a supply of Gota Mix (falling under Sub-heading 11061000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)) on which the GST liability will be 5% (2.5% CGST + 2.5% SGST).
  • The supply of Bhajiya Mix and Chutney powder will be considered as a ‘mixed supply’ of goods and will be considered as a supply of Bhajiya Mix (falling under Sub-heading 11061000 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)) on which the GST liability will be 5% (2.5% CGST + 2.5% SGST).

Despite various products of instant flour mixes falling in different sub-headings, fortunately the GST rate was the same at 5%. As regards Chutney powder, which was supplied free with a few flour mix categories, the AAR held it to be a ‘mixed supply of goods’, which too had a GST rate of 5%.

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