Because consumers are expected to mix it with milk or water before drinking it, the Supreme Court has held, drawing a clear distinction between what a product is when sold and what a consumer may eventually turn it into, protein powder cannot be taxed as a beverage simply.
Dismissing the tax department’s appeals, the SC upheld the Madhya Pradesh high court’s decision in favour of the company, holding that the products, sold in powder and biscuit forms, did not qualify as beverages under the relevant tax entry. The court chose the former. The court pointed out that protein powder could be mixed with milk or water to make a drink, but it could also be used to prepare a milk-based sweet.
Because it can be mixed into a drink, just as the same product could be used to prepare a solid food item instead, a powder does not become a beverage merely.
In a ruling with implications for the taxation of health supplements and powdered food products, the court said that tax authorities must classify goods according to their physical form at the time of sale, rather than their eventual use. “The tax authorities are bound to look at what is supplied and not at what is the ‘end use’ of the good,” it said, adding that tax laws must be interpreted according to their plain wording.
