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Tax to Taste: Flavored Milk Out of Taxman’s Favor

Lassie is made from milk – that much is clear. Not as clear is the matter of taxes on them after the addition of flavoring.

Differing Authority for Advance Rulings (AARs) directions on the tax treatment of flavored milk and flavored lassie have created confusion among food companies and milk cooperatives and may even end up hitting farmer payouts in the future.

Under the goods and services tax (GST) framework, milk and lassie are exempt from the levy. But while flavored lassie continues to remain outside GST, flavored milk is set to attract 12% tax following four AAR rulings in Gujarat, Tamil Nadu and Karnataka.

One bemused senior executive with a leading milk co-operative was moved to say: “If milk and lassie were siblings, milk would have definitely asked the government – Am I adopted?”

In a July ruling in the case of Sampoorna Dairy and Aggrotech, the Gujarat AAR said that flavored lassie was nothing but curd, water and spices, and since these were outside the GST framework, so should flavored lassie.

But in two separate advance rulings on cases involving Britannia and Gujarat Cooperative Milk Marketing Federation, owner of the Amul brand, it was ruled that flavored milk should be taxed at 12%. These rulings said that there are different types of milk” – “full cream milk” and “partially skimmed milk” being just two variants. S-ET

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