Ready to Serve Fruit Beverages with carbonation classified under HSN 22021090 attracting 28% GST plus 12% Compensation Cess

The AAR, Gujarat ruled on classification of Ready to Serve Fruit Beverages named Apple Cola Fizzy and Malt Cola Fizzy. The Authority determined that despite containing fruit juice concentrate, these beverages are carbonated with carbon dioxide (INS 290) and contain preservatives. The word "fizzy" in their names indicates carbonation. While competing classifications existed under HSN 220210 (carbonated beverages) and 22029920 (fruit juice-based drinks), the GST Council's Fitment Committee recommendation favored HSN 220210 for carbonated beverages with fruit juice. The goods are classified under HSN 22021090, attracting 28% GST plus 12% GST Compensation Cess.

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Issues Involved:
1. Classification of the products 'Apple Cola Fizzy' and 'Malt Cola Fizzy' under GST.
2. Applicable tax rate for the products under Notification No. 1/2017 – CT (Rate) dated 28.06.2017 as amended.

Issue-wise Detailed Analysis:

1. Classification of the Products:

The applicant intends to supply thermally processed ready-to-serve fruit beverages named 'Apple Cola Fizzy' and 'Malt Cola Fizzy'. These beverages are apple juice-based drinks with added flavors and carbon dioxide for preservation. The applicant argued that these products should be classified under Chapter Heading 2202 99 20 as 'Fruit pulp or fruit juice based drink' and not under 2202 10 as 'Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored'.

The applicant cited the Food Safety and Standards (Food Products Standards and Food Additives) Regulation, 2011, which differentiates between thermally processed fruit beverages and carbonated fruit beverages. They argued that their products fall under the category of thermally processed fruit beverages due to the thermal processing involved and the use of carbon dioxide solely for preservation.

However, the ruling authority noted that the classification under GST should be based on the Customs Tariff Act, which aligns with the Harmonized System of Nomenclature (HSN). The authority emphasized that the burden of classification lies with the revenue, but in this case, the revenue did not provide any comments or appear for the hearing.

The authority examined the ingredients and manufacturing process of the products and noted that the presence of carbon dioxide and the term 'fizzy' in the product names imply that these are carbonated beverages. They concluded that the products should be classified under HSN 2202 10 90 as 'Other waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored'.

2. Applicable Tax Rate:

The ruling authority referred to the GST rate schedule and relevant notifications to determine the applicable tax rate for the classified products. According to Notification No. 1/2017-Central Tax (Rate), the GST rate for goods falling under HSN 2202 10 is 28%. Additionally, as per Notification No. 1/2017-Compensation Cess (Rate), a compensation cess of 12% is also applicable.

The authority also considered the recommendations of the Fitment Committee and the GST Council, which classified carbonated beverages with fruit juice under HSN 2202 10 and recommended a GST rate of 28% along with a 12% compensation cess.

Conclusion:

Based on the analysis, the ruling authority concluded that the products 'Apple Cola Fizzy' and 'Malt Cola Fizzy' are classified as carbonated beverages with fruit juice under HSN 2202 10 90. Consequently, the applicable GST rate for these products is 28%, and a GST compensation cess of 12% is also leviable.

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