Infant food products that contain milk and other ingredients may be subjected to an 18% goods and services tax (GST), in contrast to the 5% applied to milk products. This follows a judgment by the Rajasthan Authority for Advance Ruling (AAR), setting a potential precedent.
The AAR issued this ruling in response to an application from Jaipur-based Bebymil, seeking clarity on the GST rate for its products — specifically, milk food for infants and milk for infants — marketed under the trade name Momylac.
The AAR noted that the company’s primary product is infant milk formula, which includes cereals and protein supplements, serving as a substitute for mother’s milk.
It’s crucial to understand that GST rates for goods are determined based on their Harmonized System of Nomenclature (HSN) codes. In this case, the authority observed that the products are classified under HSN 1901, encompassing products where milk is one of the ingredients, rather than HSN 0402, which specifically relates to milk products, as explained by Sandeep Sehgal, partner at tax and consulting firm AKM Global.
According to the AAR, products falling under HSN 1901 are subject to an 18% GST. Conversely, products categorized under HSN 0402 are subject to a 5% GST, clarified Sehgal.
It is emphasized that the proportion of ingredients in any product plays a significant role in determining its classification and, consequently, the applicable GST rate.