18% GST Payable On Pizza Topping As Pizza Topping Is Not Pizza: AAAR

The appellant is in the business of distributing various dairy and non-dairy products and is registered with the jurisdictional GST authorities. The product "pizza topping," which is sold by the appellant under the brand "Goodrich," is a proprietary food consisting of water, mozzarella cheese, vegetable oil, and milk solids along with premixes of emulsifiers and stabilizers. It is ideal for use on pizza as a topping of cheese as it provides a smooth, lasting taste and stringiness to the pizza.

The applicant submitted that the product "Pizza Topping" contained 14.5 percent mozzarella cheese and 15 percent other milk products, along with other ingredients, forming a type of cheese. Thus, it is classifiable under Chapter Heading 406 (SI. No. 13 of Schedule-II to Notification No. 1/2017 Integrated Tax/Notification No. 1/2017-Central Tax and Notification No. 35/ST-2 as "cheese" and chargeable to GST at the rate of 12%.

The applicant has sought an advance ruling on the issue of whether the product "pizza topping" is classifiable under Chapter Heading 0406 [S. No. 13 of Schedule-1 of Notification No. 1/2017-Integrated Tax (Rate) dated June 28, 2017, attracting 5% IGST].

The Authority of Advance Ruling held that the "pizza topping" being manufactured by the applicant cannot be classified as "process cheese" under chapter heading 0406, but rather it merits classification under chapter heading 2106 of the schedule to the Customs Tariff Act, 1975, as "Food Preparations not elsewhere specified or included" and chargeable to 18%IGST or 9% CGST and 9% SGST.

The appellant contended that the pizza topping contains mozzarella cheese, constituting almost 15 percent of the total product. It forms the main ingredient to which other ingredients are added in small quantities. The product contains 15 percent of other milk products such as milk solids and skimmed milk powder. Thus, almost 30 percent of the product consists of cheese and other milk derivatives.

The appellant urged that the essential character of the pizza topping is provided by mozzarella cheese, without which the product will not achieve its cheesy character. Further, milk solids and skimmed milk powder, falling under Chapter 4 of HSN, also constitute essential ingredients. Even after the addition of other ingredients, the topping maintains its basic cheesy character. Accordingly, the product is a type of cheese classifiable under heading 0406, which covers cheese and curd.

The AAAR, while upholding the AAR's ruling, observed that "pizza topping" is a product made out of mozzarella cheese, vegetable oil, and milk solids as main ingredients, with premixes of emulsifiers and stabilisers." The mozzarella cheese is blended with other ingredients and heated to the required degree. After heating, the material is transferred to a mould with the requisite capacity for packing the product into pouches containing smaller quantities (1 kg and 200 g). These pouches are sealed and packed in an outer carton. The product cannot be termed "processed cheese." However, there is no doubt that, being an edible preparation for human consumption, it would merit classification under Chapter 21, i.e., "Miscellaneous Edible Preparations." Once the chapter is decided, a careful examination of different entries under Chapter 21 reveals that the quest for appropriate classification rests finally at 2106 90 99, the residual entry, as the product itself does not find a specific place anywhere else in Chapter 21.

"We thus conclude that the impugned product, viz., "Pizza Topping," would merit classification as "Food preparations not elsewhere specified or included' under Chapter Heading 2106 of the schedule to the Customs Tariff Act, 1975," the AAAR added.

Applicant's Name: Khera Trading Company

Citation: Advance Ruling No. HAR/HAAAR/2018-19/06

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