After papad, cheese balls another food item to trigger GST dispute

The petitioner, Savencia Fromage & Dairy Pvt Ltd, argued for its inclusion under cheese which attracts a 12 per cent rate of GST

After papad, paratha and fryums, the issue of goods and services tax (GST) rate on yet another food item — cheese balls — has become a point of contention. The dispute has for now been settled by the appellate authority for advance ruling in Uttar Pradesh.

While GST authorities and the Authority for Advance Ruling (AAR) in Uttar Pradesh kept it under 18 per cent tax rate because it did not fall under any of the specified food items, the petitioner — Savencia Fromage & Dairy Pvt Ltd — argued for its inclusion under cheese, which attracts a 12 per cent rate. 

The company intended to make cheese balls from bread. It argued that the presence of items other than cheese in the balls did not affect their classification as cheese, provided that the goods retain the character of cheese. 

After losing its case in the AAR, the company approached the Appellate Authority for Advance Ruling (AAAR) in the state and argued that cheese forms the most important constituent of its product and accounts for 55 per cent of the total volume. It argued that this product cannot be formed without cheese. 

It said the batter and bread coating are not essential and can be easily substituted. It is only cheese that differentiates the impugned goods from any other breaded product, the company argued.

The AAAR agreed with the company’s argument and set aside an AAR order of 18 per cent GST on it.

"Once again, emphasis has been laid on the ingredients and the process for making the goods. Also, it has been held that the classification would not change merely because the product contains other ingredients such as bread, herbs, etc., so long as the essential character of the product (cheese) is retained,” said Harpreet Singh, partner, KPMG.