The ruling by the appellate authority upholds the findings of the Authority of Advance Ruling. Tax experts say it will complicate taxation for pizza brands.
The Haryana Appellate Authority for Advance Ruling (AAAR) holds that a pizza topping is not a pizza and therefore shall be classified differently and levied 18% goods and services tax (GST).
The order, that was delivered by the Appellate Authority on March 10, also reasoned that Pizza toppings are prepared differently than the pizzas.
The appellant contended that the pizza topping is mostly composed of mozzarella cheese, and it is the main ingredient. Therefore, he alleged that Pizza toppings must be classified under “Processed Cheese not grated or powdered” and not under “Food Preparations not elsewhere classified” as was held by the Advance Ruling Authority.
The Appellate Authority defined the product “cheese” as a product made from milk by application of the process of coagulation.
The Appellate Authority further noted that along with Mozzarella Cheese, there are other important ingredients like Vegetable oil (22%) and milk solids () in substantial proportions. It held that the mozzarella cheese is blended with other ingredients and heated, therefore, the product cannot be categorized under Processed Cheese.
The Authority finally held that the Pizza toppings shall fall under the category “Food preparations not elsewhere classified” which is chargeable to 18% GST.
“The authorities have given weightage to the actual ingredients…Under which one would treat them as cheese toppings and classify them accordingly,” said Harpreet Singh, partner at accounting firm KPMG India. “This reiterates the fact that classification under GST is a factor of various principles, viz. end use of product, key constituents, common parlance, etc., and hence a complex process.”, he added.
As per the Economic Times, market experts have claimed that this ruling on Pizza toppings will complicate taxation for pizza brands.
The case was filed before the Authority of Advance Ruling (AAR). The appeal against the order of the AAR was filed before the Appellate Authority of Advance Ruling (AAAR). Appeal against this order can be filed before a division bench of the High Court.