2022 (3) TMI 1083 - AAR - GST

Classification of goods - rate of tax - supply of Ready to Serve Fruit Beverage named as Apple Cola Fizzy and Malt Cola Fizzy made by the applicant - applicability of N/N. 1/2017 CT (Rate) dated 28.06.2017 as amended up to date - HELD THAT - The burden of Classification is on Revenue. However Revenue has neither appeared for personal hearing nor submitted its comments on the applicant s application. In the present case it is found that the applicant has cited classification of subject goods based on Food safety and standards regulations - 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. 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 - carbon di oxide in subject beverages has given them the carbonated effect and the goods are thereby carbonated beverages. 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 - also there is a Tariff item at 22029920 with the description fruit pulp or fruit juice based drinks . Now it is observed 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. From reading of Annexure III to the recommendation of the Fitment Committee it is noted that the Fitment Committee has cited classification of Carbonated beverages with fruit juice at HSN 220210. We further note that GST Council has approved the recommendation of Fitment Committee. Thus with this we infer that competing entries of HSN 220210 and 220299 for subject goods is answered by the GST Council decision to be 220210 for carbonated beverages with fruit juice. Apple Cola Fizzy and Malt Cola Fizzy are Carbonated Beverages with fruit juice classifiable at HSN 22021090 - GST is leviable at 28% on said goods - GST Compensation Cess leviable at 12% on said Goods.

Summary

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.