In a notable ruling, the Rajasthan Authority for Advance Rulings (AAR) has clarified that soft-serve ice cream mixes, commonly referred to as mixes “softy cones”, cannot be classified as dairy products. In result, these items will attract a Goods and Services Tax ( GST ) at the rate of 18%, instead of being considered under a lower tax bracket reserved for dairy goods. The case emerged when VRB Consumer Products Pvt Ltd approached the AAR seeking clarification on the GST rate applicable to soft cones. The applicant contended that these ice creams should fall under the category of “dairy products,” which would make them eligible for a reduced GST rate.

The authorised representative of the company, argued that the primary ingredients of softy cones are dairy-based, and therefore, the product should be considered as part of the broader dairy classification, attracting a lower GST rate. VRB Consumer Products Private Limited (“Applicant”) intends to manufacture and supply dried softy ice cream mix (low fat) in vanilla flavour (“Vanilla Mix”) at its manufacturing unit. Applicant is a company incorporated under the Companies Act, 1956. It has a PAN-India distribution network. The Applicant is registered with the Goods and Services Tax department in the State of Rajasthan and falls within the administrative jurisdiction of Central GST Commissionerate Alwar, Rajasthan. Be a GST Expert: Get Essential Questions, Key Judgements and Practical Guide, Click Here However, the AAR rejected this argument. In its ruling, the authority pointed out that softy cones cannot be classified merely as dairy products because they include various other ingredients such as emulsifiers, stabilisers, and flavouring agents, which are not typically associated with pure dairy goods.

These additional ingredients fundamentally alter the nature of the product, distinguishing it from what is traditionally recognized as a dairy product. The following was described to be the manufacturing process of Vanilla Mix: Firstly, raw materials such as milk solids, sugar, stabilisers, anti-caking agents etc. will be procured. Upon receipt thereof, applicant will undertake rigorous scrutiny and inspection of such raw materials. Thereafter, the raw materials which will meet the quality standards of applicant than these materials will be stored under appropriate conditions. The raw materials sourced and stored above will be weighed, sieved and subsequently, mixed with each other in required proportion for the required time and speed in a mechanical mixer. The mixture obtained above will thereafter be subjected to sensory evaluation, metal detection and moisture determination. Mixtures, which will pass the evaluation, shall proceed ahead for packing. Packing and dispatch — Mixtures, which will be received after a quality check, will undergo the primary packing and thereafter will be packed in cartons.

The cartons will, subsequently, be stored in godown from where they will be dispatched after micro-testing. Be a GST Expert: Get Essential Questions, Key Judgements and Practical Guide, Click Here Vanilla Mix will be sold in packages not exceeding Ikg to institutional buyers, who will use the same to produce soft serves using softy making machines. Further, Vanilla Mix will not be sold through confectionery outlets, the applicant submitted. The Authority Bench of Rajasthan Advance Ruling Authority noted that, “The product in the question which the applicant proposes to manufacture is obtained by a process of manufacture which involves not only processing of liquid milk to obtain milk solids but also the further process to which different ingredients such as sugar, stabilisers, anti-caking agents and flavouring agents are subjected along with milk solids. Thus, the process of manufacture as described by the applicant involves manufacture of an edible preparation which can be broadly termed as prepared foodstuff or beverages etc.”

“Thus, the multi-stage process adopted by the applicant to obtain the proposed product and use of various distinct items in the said process to obtain the desired edible preparation is the key factor that should determine the classification of the product to be manufactured by the applicant”, the authority bench noted. It was observed by the bench that the ingredients include 61.2% Sugar, 34% Milk (Skimmed Milk Powder) and 4.8% Other ingredients (stabilisers, anti-caking agents,citrus fibre, iodised salt, flavouring substances). The AAR bench of Central Tax Member Mahipal Singh and State Tax Member Mahesh Kumar Gowla further noted that soft-serve ice creams undergo a different production process that involves the use of machines to churn and freeze the mixture, a process not typical for traditional dairy products like milk or curd.

This unique production method contributes to the categorization of softy cones as a distinct product, separate from the dairy category. Consequently, the AAR ruled that soft cones would be taxed under the GST heading for “ice creams, including those containing dairy products,” which carries the higher 18% tax rate. Be a GST Expert: Get Essential Questions, Key Judgements and Practical Guide, Click Here It was remarked that, “The product i.e. “Vanilla Mix” – dried softy ice cream mix (low fat) in vanilla flavour is classifiable under Heading 2106 90 99 of the First Schedule to Tariff Act attracting GST at the rate of 18% (i.e. 9% CGST and 9% SGST).”