Topping used in pizza that does not contain cheese as the main ingredient is chargeable for a tax at 18% under the goods and services tax (GST), says the Appellate Authority for Advance Ruling (AAAR) at Haryana. While pizza sold and eaten in a restaurant attracts 5% GST, pizza delivered at home is charged 18% GST.
In an order passed last week, the bench of Amit Kumar Agrawal and Anil Kumar Jain, says, “Pizza topping (in this case) contains ‘vegetable fat’ as a substantial portion being 22% of the ingredients, and hence, it does not qualify to be categorised as ‘process cheese’ or a type of cheese. Pizza topping would merit classification as ‘food preparation not elsewhere specified or included’ under chapter heading 2106 of the schedule to custom tariff act, 1975 and chargeable to GST (IGST @18%, CGST @ 9% and SGST @ 9%).”
“We find that the product in question, i.e. 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 up to a required degree. After heating, the material is transferred to a mould of requisite capacity for packing the product into pouches containing smaller quantities (1 kg and 200 gram). These pouches are sealed and packed in an outer carton. The product cannot be termed as ‘processed cheese’,” the AAAR says.
Panipat-based Khera Trading Company had filed an appeal against an order passed by the Authority for Advance Ruling (AAR). In its order, the AAR said that pizza topping manufactured by the applicant could not be classified as processed cheese under chapter heading 0406.
In its submission, Khera Trading has stated that its pizza topping contains 14.5% mozzarella cheese and 15% of other milk products along with other ingredients to form a type of cheese. “Thus, it is classifiable under chapter heading 406 (SI. No. 13 of Schedule -I1 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 12%”.
“...almost 30% (14.5% mozzarella cheese + 15% milk solids and skimmed milk powder) of product is comprised of cheese and other milk derivate. Thus, the essential character of pizza topping is provided by mozzarella cheese, without which the pizza topping will not achieve its cheesy character. Notable that the topping maintains its basic cheesy character even after the addition of other ingredients. Accordingly, the pizza topping is a type of cheese under heading 0406, which covers cheese,” the company stated.
The AAAR bench observed that the pizza topping, in this case, contains ‘vegetable fat’ as a substantial portion being 22% of the ingredients, apart from mozzarella cheese which is only 14.5% of the combination of ingredients.
“Thus, the impugned item mainly comprises of ‘vegetable fat’. It is apparent from the definition of ‘process cheese’ that ‘vegetable fat’ is not a prescribed ingredient for process cheese, hence, the presence of ‘vegetable fat’ in substantial quantity results in the impugned item do not qualify to be categorised as ‘process cheese’ or a type of cheese,” the bench says.