Fruit-based fizzy drinks are subject to a 28% GST plus a 12% cess

Fruit-based fizzy drinks are subject to a 28% GST plus a 12% cess

Reetu | May 4, 2022 |

Fruit-based fizzy drinks are subject to a 28% GST plus a 12% cess

Fruit-based fizzy drinks are subject to a 28% GST plus a 12% cess

The Gujarat Authority for Advance Ruling (AAR Gujarat) in the matter of M/s. Mohammed Hasabhai Karbalai ruled out that Fruit-based fizzy drinks are subject to a 28% GST plus a 12% cess.

“If you want a fizzy drink, you’ll have to pay for it. The categorization of a cold drink determines the goods and services tax (GST) levy, which is included in the final price paid by you, the consumer. While fruit pulp or a fruit juice-based tetra pack may be subject to a GST of only 12%, if the drink is carbonated (fizzy), the user may wind up paying extra due to a higher GST.”

Facts:

The applicant initially intend to supply apple juice based drinks in the name of ‘Apple Cola Fizzy’ and ‘Malt Cola Fizzy ‘. Both the drinks will be apple juice based drinks having same ingredients and manufacturing process, the second one having an added flavour of malt.

The applicant submits that it will commercially market the products as Apple Juice based drinks or Fruit Juice based drinks and labels affixed on the product will expressly indicate the same.

It was also submitted that ‘carbonated beverage with fruit juice’ are also carbonated fruit beverage/drink just with an exception regarding the quantity of fruit juice which can be below 10% but not less than 5% as defined in the FSSAI regulations. Since, the product of applicant does not qualify to be a carbonated beverage/drink primarily as per its other characteristics, hence applicant is of the view that it cannot be classified as ‘carbonated beverage with fruit juice’.

Findings

44. In the present case, we find that the applicant has cited classification of subject goods based on Food safety and standards regulations.

45. Now, the Legislature has empowered competent authority vide Section 168 CGST Act, 2017 with the power to issue Instruction or directions as per the GST scheme of law. As per CGST Act and rules framed thereunder, we do not find FSSAI empowered under GST scheme of law to issue directions/ instructions for GST Classification.We hold that the FSSAI has been created for laying down science based standards for articles of food and to regulate their manufacture, storage, distribution, sale and import to ensure availability of safe and wholesome food for human consumption (url: https://fssai.gov.in/cms/about-fssai.php#) ; and cannot be the factor for determination of the classification of goods under the GST scheme of law and procedure. The issue whether the regulation of other statute can be used for determination of the classification under the different statute, has been addressed by the H’ble Apex Court in the case of Commissioner of Central Excise, New Delhi v. Connaught Plaza Restaurant (P) Ltd. [2012 (286) E.L.T. 321 (S.C.) – para 43]. The H’ble Supreme Court has held that it is a settled principle in excise classification that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute. The same view was held by Hon’ble High Court of Bombay in the case of Kaira Dist. Co. Op. Milk Producers’ Union Ltd. v. U.O.I. [1989 (41) E.L.T. 186 (Bom.) – Paras 7 and 8]

47. The facts on record for the subject goods are as follows:

a. Both the goods are Apple Juice based beverages with apple juice concentrate 1.9% [Equivalent to 12.7% Apple Juice Reconstituted]

b. Both goods have carbon dioxide (INS 290)

c. Both goods have preservatives (INS211, INS224, INS202)

48. Further, in a common parlance sense, we note that the names of both the goods have the word ‘ fizzy’ which gives a reasonable impression in the market that these goods are carbonated with carbon dioxide, due to the very word ‘ fizzy’ appearing in their descriptions. We note that it is a fact that both the goods have been carbonated with carbon di oxide (INS 290). Further, both the goods have INS 211, INS 224, INS 202 as preservatives. We are of the opinion that carbon di oxide in subject beverages has given them the carbonated effect and the goods are thereby carbonated beverages.

51.1 In pursuance to para 51, we are of the opinion that the subject goods which consist of water, sugar, sweetener, apple juice concentrate, flavours, aerated with carbon dioxide gas and presented in airtight containers fulfil the criteria to merit consideration for classification at HSN 220210.

52. We hold that subject goods, as evidenced from the Table-I at para 51, are carbonated beverages with fruit juice. Further, we, also, do notice there is a Tariff item at 22029920 with the description ‘fruit pulp or fruit juice based drinks’. Now we do observe that the subject goods having apple juice concentrate 1.9 % [Equivalent to 12.7% Apple Juice Reconstituted] appear to satisfy this description also and prima facie this heading 22029920 cannot be brushed aside as not applicable for subject goods.

Issues where no change has been proposed by the Fitment Committee in relation to goods:

1. Average pre-GST tax incidence on such goods was about 40%.

2. Keeping in view the pre-GST tax rates, the Council has recommended 28% GST rate and 12% Compensation Cess on Aerated waters containing added sugar or other sweetening matter or flavoured (including lemonade)

3. Earlier, the Committee of Secretaries (CoS) in a meeting held on 29-8-2016 did not agree to the proposal of MoFPI to provide concessional rate of excise duty @ 6% for aerated drinks having fruit juice content of not less than 5% procured from domestic manufacturers

4. The issue regarding separate classification was earlier examined during the 28th GST Council meeting but the fitment Committee did not agree with the proposal keeping in mind the domestic fruit processing Industry

5. Fitment Committee does not recommend any reduction in present GST rate.

54. We note that the GST Council has agreed to the above recommendation as per the Minutes of the Meeting, the relevant para is reproduced as follows:

34.31 From item Nos. 43 to 57 of Annexure-III, the Council had no objection and approved the recommendation of Fitment Committee. The Hon’ble Minister from Uttar Pradesh raised the issue about item at Sl. No. 58 of Annexure III i.e. Extra Neutral Alcohol (ENA).

55. Further, GST council meeting held on 13th Sept. 2021, in the Press Release has issued following clarification:

5. Carbonated Fruit Beverages of Fruit Drink and Carbonated Beverages with Fruit Juice attract GST rate of 28% and Cess of 12%. This is being prescribed specifically in the GST rate schedule.’

57. In conspectus of aforementioned discussions and findings, we pass the Ruling, based on the following:

i. The Explanatory Notes to HSN 220210

ii. The GST Council has approved the recommendation of said Fitment Committee, wherein carbonated beverages with fruit juice had been classified at HSN 220210.

iii. We abide by the decision of the GST Council, for it is legal and proper so to do, as also cited in the said H’ble Delhi High Court’s Decision at paragraph 57 of this Ruling.

Ruling

1. Apple Cola Fizzyand Malt Cola Fizzyare Carbonated Beverages with fruit juice, classifiable at HSN 22021090.

2. GST is leviable at 28% on said goods.

3. GST Compensation Cess leviable at 12% on said Goods.

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