Fruit-based fizzy drinks to draw 40% rate under GST after Gujarat ruling

The authority did not agree with a petitioner's that fruit-based drinks should attract 12 per cent GST

Fruit-based fizzy drinks will continue drawing goods and services tax (GST) of 28 per cent along with 12 per cent compensation cess after a ruling by the Gujarat-based authority for advance ruling (AAR).

The authority did not agree with a petitioner's that fruit-based drinks should attract 12 per cent GST. The ruling was on a petition by Mohammed Hasanbhai Kabalai, who appealed the AAR for relevant GST for his proposed ‘Apple Cola Fizzy’ and ‘Malt Cola Fizzy ' drinks.

He said both drinks are apple juice-based and the second one has added flavour of malt.

Under GST tariffs, fruit-pulp or fruit juice-based drinks draw a 12 per cent rate. On the other hand, aerated waters and carbonated drinks are charged 28 per cent GST along with 12 per cent cess.

 

The petitioner based his arguments on the Food Safety and Standards Authority of India (FSSAI) regulations. He argued that the drinks are not carbonated.

Kabalai relied on a Supreme Court ruling on the similar product to say that his products are not carbonated but are thermally processed with carbon dioxide (CO2) which helps in preserving the fruit juice concentrate. As such the products are ready to serve fruit beverages which should attract 12 per cent rate, he argued.

The AAR, however, relied on the GST Council's decision which kept these goods under the category--carbonated beverage with fruit juice--and ruled that 28 per cent GST along with 18 per cent cess will be levied on these drinks.

Sandeep Sehgal, partner-tax at AKM Global, said the AAR has enunciated the legal principle that definitions in a statute may have a different purpose and may not be imported from one to another.

"In this case, the FSSAI classification cited by the taxpayer was not in sync with the GST classifications, hence the AAR refused to place reliance on that," he said.

Source:::BUSINESS STANDARD ,  dated 07/04/2022.