Background:

M/s. Kitchen Express Overseas Ltd., a manufacturer of instant mix flours, approached the Gujarat Authority for Advance Ruling (GAAR) seeking clarification on the appropriate HSN code and GST rate applicable to their products. The company argued that their products should be classified under HSN code 1106, attracting a lower GST rate of 5%, as they are essentially flours with added spices.

GAAR's Ruling:

The GAAR disagreed with the company's claim. They classified the products under HSN code 2106 90 ("Others") attracting a higher GST rate of 18%. The GAAR's reasoning was based on the following factors:

• The products contain spices and other ingredients beyond those allowed for "flour" under HSN code 1106.
• The proportion of these additional ingredients ranged from 5% to 27%, signifying a significant alteration from plain flour.
• The packaging and ingredient list labelled the products as "Instant Mix," indicating they are pre-mixed for a specific culinary purpose.
• The final product requires some cooking process before consumption, but the added ingredients suggest it's more than just basic flour.

Appellant's Contentions:

The company appealed the GAAR's decision to the Gujarat Appellate Authority for Advance Ruling (GAAAR). They argued that:

• Their products are primarily flour and should be classified under HSN code 1102 or 1106.
• The spices are added in minimal quantities, similar to Sattu (a flour mix traditionally used in India) which attracts a lower GST rate.
• The products are not "ready to eat" but require cooking, like Sattu.

GAAAR's Analysis:

The GAAAR considered the appellant's arguments and reviewed the HSN code explanations and relevant circulars. They concluded that:

• The added spices and ingredients disqualified the products from classification under HSN code 1102 or 1106, which are specific to plain flours.
• The CBIC circular cited by the appellant (regarding Sattu) was not applicable because Sattu has specific ingredients mentioned in the GST rules, unlike the instant mix flours with varying spice content.

Case Law -Kitchen Express Overseas Ltd 

Citation-2024 TAXONATION 1157 (GUJARAT-AAR)

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