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March 22, 2022

Pizza topping isn’t pizza, so will attract a higher GST Levy at the rate of 18%

by CA Shivam Jaiswal in GST

Pizza topping isn’t pizza, so will attract a higher GST Levy at the rate of 18%

Facts and issue of the case:

The Appellant is inter alia engaged in the distribution of various dairy and non-dairy products and are registered with the jurisdictional GST authorities vide GSTIN 06A0EPK0998K1ZK. The goods ” Pizza Topping” is sold by the appellant under the brand ‘Goodrich’ is a proprietary food consisting of water, mozzarella cheese, vegetable oil and milk solids along with premixes of emulsifiers and stabilizers. It is ideal for use on pizza as a topping of cheese as it provides smooth lasting taste and stringiness to pizza. The impugned good comprises of 14.5 percent mozzarella cheese to which other milk products such as skimmed milk powder and rennet casein are added. The milk ingredients constitute another 15 percent. The composition of impugned good is tabulated as under; Name of Ingredient/additive Ratio Water 44 kg Vegetable Fat 22kg Mozzarella Cheese 14.5 kg Rennet Casein (milk solid) 11 kg Skimmed milk powder 4 kg  4.5 kg Premix (emulsifier, stabilizer, acidity regulator and _preservative) Total 100 kg.

Manufacturing Process:

1) The ingredients above are poured and mixed together in a Stephens cooker

2) The above mixture is heated at 75-80 degre C. for about.5— 10 minute

3) After heating, the materiel is transferred to a mould of requisite capacity for packing the product into pouches containing smaller quantities (1 kg and 200 grm). These pouches are sealed and packed in an outer carton.

4) The pizza topping comprises of 14.5 percent ‘Mozzarella cheese to which other milk products such as skilled milk powder and rennet casein are added The proportion of the milk products and other Ingredients constituting 41.5 percent are as under:-

The applicant submitted that the product “Pizza Topping” containing 14.5 per cent Mozzarella cheese and 15 per cent of other milk products along with other ingredients forms a type of cheese. Thus, it is classifiable under Chapter Heading 406 (SI. No. 13 of Schedule 41 to Notification No. 1/2017 Integrated Tax/Notification No. 1/2017-Central Tax and Notification No 35/ST-2 as “cheese” and chargeable to GST @ 12%.

The applicant submitted that mozzarella cheese constitutes 14.5 percent of the total Pizza Topping and it forms the main ingredient to which other ingredients are added in small quantities Pizza Topping contains 15 percent of other milk products such as milk solids and skimmed milk powder (already provided at Para. 2 5 under Annexure )} Thus almost 30 percent {14.5% (mozzarella cheese) + 15% (milk solids and skimmed milk powder)} of product is comprised of cheese and other milk derivate. Thus, the essential character of Pizza Topping is provided by mozzarella cheese without which the Pizza Taping will not achieve its cheesy character. Notable that topping maintains its basic cheesy character even after addition of other ingredients. Accordingly, the pizza Topping is a type of cheese under Heading 0406 which covers cheese.

Based on the above submissions, the applicant raised the following question on which advance ruling was sought:

Whether the product ‘pizza topping” is classifiable under Chapter Heading 0406 [S. No. 13 of Schedule-1 of Notification No 1/2017-Integrated Tax (Rate) dated June 28, 2017, attracting IGST @ 5% / (SNo.89 of schedule-I of Notification No 01/2017 Central Tax (Rate) dt.28.067 attracting CGST 2.5%)/ {S.No.89 of schedule-I of Notification No 35/ST-2 attracting SGST @ 2.5%)

Observations of the court

The Tribunal has considered the material on record including the appellants grounds, submissions, statutory provisions etc. In terms of Section 101(1) of the Act, this Appellate Authority is mandated to pass such order as it thinks it, confirming or modifying the ruling appealed against.

The appellant has contended that the Product “pizza topping” containing 14.5 percent Mozzarella cheese and 15 per cent of other milk products such as milk solids and skimmed milk powder along with other ingredients forms a type of cheese; that topping maintains its basic cheesy character even after addition of other ingredients. Thus, it is classifiable under Chapter Heading 0406 (SI. No. 13 of Schedule 41 to Notification No. 1/2017 Integrated Tax/Notification No. 1/2017-Central Tax and Notification No 35/ST-2 as “cheese” and chargeable to GST @ 12%.

The question for determination in this appeal is whether the product “Pizza Topping” manufactured/ supplied by the appellant merit classification under Heading 0406 as claimed by the appellant or classifiable under Heading 2106 as determined by the Authority for Advance Ruling, Haryana.

We found that for any given product, the name, character and use are three important ingredients which decide the classification of any given product. Hence we proceed to examine the classification of impugned item, keeping in mind the above guiding factors.

The impugned item is being sold by the appellant as “Pizza Topping” which contains water, mozzarella cheese, milk solids, skimmed milk powder and vegetable oil along with premix of emulsifiers, stabilizers, acidity regulators and preservatives, chesses fall under chapter heading 0406 .

The tribunal has gone through the HSN Explanatory notes to chapter heading 0406 which provides as under:

1. The expression “milk” means full cream milk or partially or completely skimmed milk.

2. For the purposes of heading 0405: (a) the term “butter” means natural butter, whey butter or recombined butter (fresh, salted or rancid, including canned butter) derived exclusively from milk, with a milk fat content of 80% or more but not more than 95% by weight, a maximum milk solids-not-fat content of 2% by weight and a maximum water content of 16% by weight. Butter does not contain added emulsifiers, but may contain sodium chloride, food colours, neutralizing salts and cultures of harmless lacticacid-producing bacteria; (b) the expression “dairy spreads” means a spreadable emulsion of the water-in-oil type, containing milkfat as the only fat in the product, with a milkfat content of 39% or more but less than 80% by weight. 3. Products obtained by the concentration of whey and with the addition of milk or milkfat are to be classified as cheese in heading 0406 provided that they have the three following characteristics:

(a) a milkfat content, by weight of the dry matter, of 5 % or more;

(b) a dry matter content, by weight, of at least 70 % but not exceeding 85 %; and

(c) they are moulded or capable of being moulded. 4. This Chapter does not cover:

(a) products obtained from whey, containing by weight more than 95% lactose, expressed as anhydrous lactose calculated on the dry matter (heading 1702);

(b) products obtained from milk by replacing one or more of its natural constituents (for example, butyric fats) by another substance (for example, oleic fats) (heading 1901 or 2106); or”

(c) albumins (including concentrates of two or more whey proteins, containing by weight more than 80% whey proteins, calculated on the dry matter) (heading 3502) or globulin (heading 3504).

We find that the product in question i.e. ‘Pizza Topping’ is a product made out of mozzarella cheese, vegetable oil and milk solids as main ingredients with premixes of emulsifiers and stabilizers. The mozzarella cheese is blended with other ingredients and heated upto a required degree. After heating, the materiel is transferred to a mould of requisite capacity for packing the product in op containing smaller quantities (1 kg and 200 grm). These pouches are sealed and packed in an outer carton. The product cannot he termed as ‘Processed Cheese’ as already discussed above. However, there is no doubt that being edible preparation for human consumption, it would merit classification under Chapter 21 i.e. ‘Miscellaneous Edible Preparations’. Once the chapter is decided, a careful examination of different entries under Chapter 21, the quest for appropriate classification rests finally at 2106 90 99, the residual entry, as the product itself does not find specific place anywhere else in the Chapter 21. We thus conclude that the impugned product viz. “Pizza Topping’ would merit classification as Food preparations not elsewhere specified or included’ under Chapter Heading 2106 of the schedule to the Customs Tariff Act, 1975, and chargeable to GST as applicable.

19.3 Having observed as above, we further hold that the impugned goods shall be aptly classifiable under Chapter Head 2106 of the schedule to the Custom Tariff Act, 1975 as ‘Food preparations not elsewhere specified or included’ and chargeable to IGST @ 18%, CGST @ 9% and SGST @ 9%, as specified under S.No.23 of Schedule-Ill of Notification No.1/2017. Integrated Tax (Rate) dated June 28, 2017, Notification No.01/2017-Central Tax (Rate) dated 28.06.17 and of Notification No.35/ST-2.

Conclusion:

The Haryana Appellate Authority of Advance Ruling (AAAR) held that 18% Goods and Service Tax (GST) is payable on pizza topping as pizza topping is not pizza.

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