2019 (11) TMI 1366 - AAR - GST

Classification of goods - rate of GST - fruit beverages or drinks 'K Juice Grape' - scope of definition under the FSSAI Act in section 2.3.3.A - Is there any persevered percentage of fruit or pulp in the beverages to call them as carbonated fruit beverages or drinks under the GST Act? - whether the said product fall under the category of fruit beverages or fruit based drinks? HELD THAT - The label of the product have the description Carbonated Fruit Beverage . As per the label, the ingredients are Carbonated water, sugar, grape juice, acidity regulator, etc. It also has permitted flavour and colour - as per the classification of FSSAI, Fruit juices are unfermented but fermentable product obtained by a mechanical process from sound, ripe fruit or the flesh thereof and processed by heat, in an appropriate manner, before or after being sealed in a container, so as to prevent spoilage and are intended for direct consumption. In the instant case, the product is made by adding fruit juices to large quantities of water along with other preservatives which then goes through a carbonation process. The juices are not meant for direct consumption here but are just one ingredient of the drinks - fruit juices and carbonated beverages with fruit drinks are distinct products in the FSSAI regulations and the product of the applicant is not thermally processed fruit juice but covered under Para 2.3.30 of the regulations and Category 14.1.4.1 in the food category system in Appendix A to these regulations. In the instant case, water constitutes around 76% in the products in question. The product is prepared by adding fruit juice, procured by the applicant (as per the letter addressed to the applicant by Food Systems Asia), to RO water. It is evident that this large quantity of water results in diluted product which as per the Explanatory Notes above gets classified under CTH 2202 - In the case at hand, the manufacturing process of the products involves addition of Grape juice (13%) to the filtered sugar solution (86%-76% RO water and 10% Sugar) in a blending tan which is subjected to Mild Thermal Treatment (loss of water by 2 to 3%), cooled to room temperature, to which additives and preservatives as per the formulation and coloring flavoring agent are added. Waters with added carbon dioxide which may contain added preservatives and flavoring, sugars are separately classified under Para 2.10.6 as Carbonated Water and Category 14.1.1.2 as table waters and soda waters which are different from Carbonated Fruit Beverages or Fruit Drinks of Para 2.3.30 and Category 14.1.4.1 of FSSAI regulations - the applicants product is classified under Para 2.3.30 of FSSAI and not para 2.10.6. It is evident that the carbonated water described in Para 2.10.6 of FSSAI regulations are the Aerated Waters covered under CTH 22021010. Therefore, the applicant s product is not classifiable as Aerated Waters under CTH 22021010 and the product commercially named as K juice Grape is classifiable under CTH 22021090- Other as it contains the Grape fruit juice with added natural and artificial flavours.

Summary

Issues Involved:
1. Classification of the product "K Juice Grape" under GST.
2. Rate of tax and HSN code for the product.
3. Requirement of a specific percentage of fruit or pulp in beverages to classify them under GST.

Detailed Analysis:

Issue 1: Classification of the Product "K Juice Grape"
The applicant sought to classify their product "K Juice Grape" under the category of fruit beverages or fruit-based drinks. The product is described as a "Carbonated Fruit Beverage" with ingredients including carbonated water, sugar, grape juice, acidity regulator, permitted flavor, and color. The manufacturing process involves adding grape juice to a sugar solution, followed by thermal treatment, cooling, adding additives, preservatives, coloring, flavoring agents, and carbonation.

According to the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011, fruit juices are defined as unfermented products obtained from ripe fruits, processed by heat, and intended for direct consumption. The applicant's product, which involves adding fruit juice to water and other ingredients, does not meet this definition. Instead, it falls under "Carbonated Fruit Beverages or Fruit Drinks" as per Para 2.3.30 of the FSSAI regulations, which includes beverages prepared from fruit juice and water or carbonated water with added sugar and other ingredients.

The Customs Tariff Act classifies fruit juices under Chapter 2009, which covers unfermented fruit juices without added spirit. However, the addition of water to fruit juice results in diluted products classified under heading 2202. The applicant's product, with 76% water content, is classified under CTH 2202 as a beverage containing added sugar or other sweetening matter or flavored. Specifically, it falls under CTH 2202 10 90 ("Other") as it contains grape juice with added flavors.

Issue 2: Rate of Tax and HSN Code for the Product
The product "K Juice Grape" is classified under CTH 2202 10 90 ("Other") as per the Customs Tariff. The applicable rate of tax is 14% CGST and 14% SGST, making a total of 28%. This classification is supported by Notification No.1/2017-Central Tax (Rate) and Notification No. II(2)/CTR/532(d-4)/2017, which specify the tax rates for goods under this heading.

Issue 3: Requirement of a Specific Percentage of Fruit or Pulp in Beverages
The applicant inquired whether there is a prescribed percentage of fruit or pulp in beverages to classify them as carbonated fruit beverages or drinks under the GST Act. This question does not fall under the categories specified in Section 97(2) of the CGST Act/TNGST Act, which limits the scope of the Advance Ruling Authority to specific issues such as classification, applicability of notifications, determination of supply value, admissibility of input tax credit, liability to pay tax, registration requirements, and whether a particular activity amounts to a supply of goods or services. As such, the Advance Ruling Authority did not provide a ruling on this issue.

Ruling:
1. The product "K Juice Grape" is classified under CTH 2202 10 90 ("Other").
2. The applicable rate of tax for "K Juice Grape" is 14% CGST and 14% SGST, totaling 28%.
3. The question regarding the prescribed percentage of fruit or pulp in beverages was not answered as it is not covered under Section 97(2) of the Act.