Uttar Pradesh AAAR Rules S.S. Traders' Cream as Vegetable Oil Preparation

In re S.S. Traders (GST AAAR Uttar Pradesh)

Uttar Pradesh Appellate Authority for Advance Ruling (AAAR) recently conducted a classification case for a vegetable oil-based product of S.S. Traders. The primary aim was to find the appropriate GST rate and chapter of classification, which is a crucial aspect in compliance with GST. S.S. The vendors, who are Bareilly-based, argued that their commodity would fall in the 5% GST slab under Chapter Heading 1517. The Advance Ruling Authority, however, first put the product in Chapter 2106 under an 18% GST slab. ## Background of the Case

S.S. Traders objected to April 15, 2024, advance ruling (No. UP ADRG-01/2024), which had held their product to be classified under Chapter Heading 2106 with 18% GST applicable.

The product is a "cream" intended for food, and it consists of 23% vegetable fat and milk solids, sugar, and stabilizers. The company argued that the absence of dairy fat brought it into the category of an "edible preparation of vegetable fat" under Chapter Heading 1517 and thus incurred a 5% GST.

Disputed Issues and Grounds of Appeal

Significant Points Raised by S.S. Traders:

Composition of the product and classification: S.S. Traders insisted that classification can be done by relying on the main ingredient in the product, which is vegetable oil, as explained in the Harmonized System of Nomenclature (HSN) explanatory notes. Chapter Heading 1517 is aptly utilized in classifying those products having the predominant component in edible fats and oils, similar to their cream's characteristics.
General Parlance and Product Use: The product is familiar to consumers as a cream used in cooking, which is in line with its application, although it is not dairy fat-containing. Thus, the classification should be under Heading 0402 or 1517.
Alternative Classification under Heading 0402: The company recommended an alternative classification under Heading 0402, which is mostly reserved for dairy products, as the product is utilized for identical cooking purposes.
Particular vs. Broad Classification Rule: Applying Rule 3(a) of the GST classification rules, S.S. Traders appealed the particular classification under Chapter 1517 to supersede the general classification of Heading 2106.

AAAR's Analysis and Ruling

Following a review of the relevant classification headings, HSN notes, and production process of the product, AAAR made the following conclusions:

Product Composition: AAAR established the high vegetable oil content as is in Chapter Heading 1517. They stated that minor components such as stabilizers and emulsifiers do not alter the classification based on the primary vegetable oil content of the product.
Analysis of HSN Notes: The AAAR referred to HSN explanatory notes for Heading 1517 and recognized that there are additives permitted. Small ingredients like sugar don't change the classification much.
Rule of Specificity: The AAAR believed Rule 3(a) prefers the classification under Heading 1517, thus the correct choice over the general description of Heading 2106.
Condonation of Delay: The AAAR accepted the explanation of S.S. Traders for the delay in filing the appeal and permitted the extra time requested.

Conclusion: Classification as a Vegetable Oil Preparation under Heading 1517

Briefly, the AAAR ruled that S.S. Traders' products should be classified under Chapter Heading 1517 and hence the products attract a GST rate of 5%. The paramount consideration in arriving at this ruling was the major characteristic of the product as a vegetable oil preparation.