Madras HC: GST Decision Based on SC's Ruling in Mohit Mineral Case Over Flavoured Milk

Madras HC's Order for M/s.Parle Agro Pvt. Ltd

The Madras High Court has decreed that flavored milk will be subject to a reduced GST rate of 5%. This ruling also curtails the authority of the GST Council in product classification, emphasizing that its role is merely advisory, not determinative.

In a recent ruling prompted by a writ petition from Parle Agro disputing the categorization of flavored milk, the Madras High Court referenced a Supreme Court case, Mohit Mineral Private Limited. The apex court's stance emphasized that the GST Council's suggestions aren't binding on the Union and states.

Applying the principle of noscitur a sociis to interpret 'Beverage containing milk,' the High Court concluded that it exclusively refers to plant or seed-based milk, excluding dairy milk. Chapter 4 of the GST tariff classification covers dairy products, including milk.

Justice C. Saravanan, in the Madras High Court's single bench, classified flavored milk under GST tariff heading 0404. However, the Court highlighted the need for a fresh government notification to amend the tax rate. Throughout, it acknowledged the established legal principle that authorities have leeway in setting tax rates in matters of taxation.

In December 2018, the GST Council had previously set the tax rate for flavored milk at 12% under Tariff Chapter 2202.

Experts anticipate that the decision made by the Madras High Court will likely be contested in the Supreme Court.

This judgment holds significance as a support for taxpayers when challenged by revenue authorities citing discussions in GST Council meetings regarding product classification. However, the note highlights that the authority to implement such decisions by the GST Council, by amending relevant legal provisions, remains within the government's purview and could be exercised.

Raghavan Ramabadran, Executive Partner at Lakshmikumaran & Sridharan Attorneys, highlighted that the Court's ruling clarified that only plant-based milk products fall under Tariff Chapter 2202, excluding dairy-based ones. He emphasized the legal standpoint that the GST council's recommendations under Article 279A of the Constitution are merely advisory. Furthermore, he noted that the council lacks the authority to resolve classification disputes. He expressed that this ruling presents a welcome development for the dairy-based industry.

He added that the industry must conduct a comprehensive analysis of this decision before determining their tax positions.

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