GST @12% applicable on unbranded pre-packaged namkeens and salted/flavoured potato chips

The AAR, Gujarat in the matter of M/s Prajapati Keval Dineshbhai [Order No. GUJ/GAAR/R/2022/54 dated December 30, 2022] has held that, the supply of un-branded packaged namkeens and potato products such as chips/sev etc., according to pre-determined weights, will attract Goods and Services Tax ("GST") at 12% as per Sl. No. 46 of Schedule-II of Notification No. 01/2017 - Central Tax (Rate) dated June 28, 2017 ("the Goods Rate Notification"). Further held that, the supply of dry potato starch powder as a bye product has a specific entry and is classified under Sl. No. 18 of Schedule-II of the Goods Rate Notification, attracting GST rate of 12%.

Facts

M/s Prajapati Keval Dineshbhai ("the Applicant") is an un-registered person and intended to set-up a manufacturing unit of various unbranded food products like potato chips (various flavours), potato sev, potato chivda, gathiya and other snacks ("the Products") and supply in packages of pre-determined weight. Further, the Applicant will be producing ‘dry potato starch powder' as a by-product of manufacture of potato based products.

The Applicant submitted the manufacturing process of all the Products and contended that the Products fall under the category of ‘Namkeens' and should be classified under Sl. No. 101A of Schedule - I of the Goods Rate Notification and Customs Tariff Heading ("CTH") 2106 90 99 irrespective of their ingredients and shall be liable to be taxed at 5% GST. Further, the dry potato starch powder shall be classified under Sl. No. 18 of Schedule - II of the Goods Rate Notification and under CTH 1108 13 00 and shall be liable to be taxed at 12% GST.

The Applicant filed this application to the AAR seeking the classification and applicable GST rates on the Products.

Issue

Whether the unbranded food Products manufactured by the Applicant is to be taxed at 5% GST or at 12% GST?

Held

The AAR, Gujarat in Order No. GUJ/GAAR/R/2022/54 of 2022 held as under:

• Observed that, the word ‘Namkeen' is not defined under the Central Goods and Services Tax Act, 2017 ("the CGST Act") and applying the common parlance test, deciphered that ‘Namkeen' is a savoury snack that is ready to eat and is prepared by applying salt, masala, etc.
• Referred to the Judgment of Hon'ble CESTAT, New Delhi in the matter of Pepsico India Holidings (P.) Ltd. v. CCE & ST [2015 (318) ELT 278 (Tri - Delhi)]wherein, it was observed that salted food preparations are called ‘Namkeen'.
• Observed that, the Applicant intendsto supply pre-packaged and labelled food products. Further, w.e.f. July 18, 2022, SI. No. 101A of the Schedule-I of the Goods Rate Notification is applicable to the goods that are not pre-packaged and labelled, which was earlier applicable to un-branded packages which do not contained any brand name. Thus, the Applicant is not eligible to tax rate of 5%GST under SI. No. 101A of the Schedule-I of the Goods Rate Notification.
• Stated that, the Products of the Applicant are classifiable under CTH 2106 90 99, even though the Applicant is intending to supply its products unbranded, the Products will be pre-packaged and labelled as per the Legal Metrology Act, 2009 and therefore, the Products will be classified under Sl. No. 46 of Schedule-II of the Goods Rate Notification and will attract GST at 12%.
• Further stated that, potato starch has a specific entry and is classified under CTH 1108 13 00 under Sl. No. 18 of Schedule-II of the Goods Rate Notification, attracting GST rate of 12%.
• Held that, the Products of the Applicant are classified under CTH 2106 90 99 and attract GST at 12%. Further held that, the by-product i.e. dry potato starch powder is classified under CTH 1108 13 00 and will attract GST at 12%.

Relevant Provisions

Sl. No. 46 of Schedule - II of the Goods Rate Notification

"Schedule II - 6%

Sl. No. 18 of the Goods Rate Notification

"Schedule II - 6%