GST Treatment of Nata De Coco (Coconut Jelly): Kerala AAR Rules under 21069099

1. Background and Context

M/s. Nata Nutrico Coconut Food Products Limited Liability Partnership, registered under GST with GSTIN 32AAQFN7237G1Z3, approached the Kerala Authority for Advance Ruling (AAR) seeking clarity on the classification and tax rate applicable to its product “Nata De Coco (Coconut Jelly)”. The concern stemmed from the assessee’s existing practice of classifying this item under HSN 20079990 and paying GST at 12%, and the need to confirm whether this treatment was legally sustainable under the GST Tariff.

The ruling examines:

  • The correct classification of Nata De Coco under the GST Tariff; and
  • The corresponding GST rate for different periods under relevant rate notifications.

The AAR analysed the product’s nature, composition and manufacturing steps, in light of the Central Goods and Services Tax Act, 2017 and the Kerala State Goods and Services Tax Act, 2017 (together referred to through the provisions of the CGST Act, including correlative rules and notifications).

2. Product Description and Manufacturing Process

2.1 Nature of Nata De Coco

The assessee manufactures Nata De Coco as a processed edible preparation, popularly perceived as “coconut jelly”. The principal raw materials are:

  • Coconut water; and
  • Coconut milk / coconut extract.

The end product is a gelatinous, cube-like edible substance, fit for human consumption and sold in packed form.

2.2 Key Process Steps

As placed on record before the AAR, the manufacturing process broadly involves the following stages:

  1. Preparation of Base

    • Filtration of coconut water and coconut milk.
    • Mixing with sugar and salt.
    • Cooking the mixture.

  2. Fermentation Stage

    • Cooling the cooked mixture.
    • Adjusting pH to facilitate fermentation.
    • Adding Acetobacter xylinum to initiate fermentation.
    • Keeping the mixture under fermentation for around 14 days.

  3. Formation of Raw Nata Layer

    • A gelatinous cellulose matrix (raw Nata De Coco) is formed during the fermentation.

  4. Post-Fermentation Processing

    • Soaking the raw nata layer.
    • Cutting into uniform pieces.
    • Cleaning, draining and washing.
    • Further cooking with purified water, sugar, citric acid and permitted preservatives.

  5. Final Presentation

    • Packing and sealing for sale as an edible coconut-based preparation.

The assessee emphasised that the entire procedure involves both cooking and fermentation, culminating in a processed food preparation derived from coconut and suitable for direct human consumption.

3. Questions Raised Before the AAR

The primary question framed for ruling was:

Whether “Nata De Coco (Coconut Jelly)” manufactured by the assessee is classifiable under HSN 20079990 and, if not, what is the proper classification and applicable GST rate under the CGST Act, 2017 and the KSGST Act, 2017?

The matter falls within Section 97(2)(a) and Section 97(2)(e) of the CGST Act, as it concerns classification of goods and determination of tax liability.

4. Assessee’s Contentions

4.1 Claim for Classification under Heading 2007

The assessee argued that Nata De Coco should be treated as a coconut-based fruit jelly and accordingly be classified under:

  • Chapter Heading 2007 – “Jams, fruit jellies, marmalades, fruit or nut purée and fruit or nut pastes, obtained by cooking, whether or not containing added sugar or other sweetening matter”; and
  • Specifically, Tariff Item 20079990 – “Other”.

The reasoning advanced included:

  • The product is a jelly-like preparation obtained by cooking and fermenting coconut water and coconut extract with sugar.
  • It is a processed edible preparation derived from coconut, intended for human consumption.
  • In terms of the General Rules for Interpretation, particularly Rule 3(a), the most specific description should prevail. Since it is a jelly-like fruit-based product obtained after cooking, Heading 2007 was claimed as the most specific and appropriate heading.

4.2 Reliance on Industry Literature

The assessee placed reliance on an article in the Coconut Development Board journal (December 2017), which had indicated that Nata De Coco falls under HSN 20079990.