Lassi Exempt from GST, But Not Flavoured Milk

The GST Authority for Advance Rulings (AAR-Gujarat) has held that lassi, the fermented milk product, is exempt from goods and services tax (GST).

The AAR made the ruling in a recent case where a Valsad-based manufacturer and supplier — Sampoorna Dairy and Agrotech — had approached it on the applicable GST rate.

On the flip side, owing to the complexities in classification, AAR benches have held in the past that flavoured milk is not exempt from GST.

The Valsad-based dairy sold lassi under the brand name ‘Elan’ in four flavours — plain (with no sugar or salt added), salted with cumin, strawberry sweetened with sugar, and blueberry sweetened with sugar.

The AAR bench noted that the main ingredients of the lassi that was being manufactured and sold were curd, water and spices.

The ingredients displayed on the bottle were pasteurized toned milk, spices, pudina, green chilli, ginger, salts, active culture, added nature-identical flavour and stabiliser. The bottle displayed that it was a ‘dairy-based fermented drink’.

Fortunately for the manufacturer, and the end consumer, curds, lassi and buttermilk come under a specific classification (HSN 040390) and are exempt from GST. Tax experts point out that manufacturers and suppliers of flavoured milk have not been as lucky.

The Gujarat AAR itself, in the case of Amul, which manufactured and supplied flavoured milk (made of milk added with sugar and permitted flavours) had held that a GST rate of 12% would apply (HSN 22029930).

“In essence, both lassi and flavoured milk are dairy-based drinks, but the classification codes treat them differently,” said a tax expert.