2022 (9) TMI 841 - AAR - GST

Classification of goods - non-alcoholic malt drink 'Kingfisher Radler' - covered as Carbonated beverages of fruit drink or carbonated beverages with fruit juice of chapter heading 2202 or not - applicability of Entry 12B of Notification No.1/2017 dated 28.06.2017 (as introduced by Notification No.8/2011-Central Tax (Rate) dated 30.09.2021) - whether the impugned product qualifies to be a non-alcoholic beer or not? - HELD THAT - Reference made to the Explanatory Note 3 to chapter 2202 wherein it is specified that for the purposes of heading 2202, the term 'non-alcoholic beverages' means beverages of an alcoholic strength by volume not exceeding 0.5% vol. Further Explanatory Notes to Chapter Heading 2202 specify that the said heading covers non-alcoholic beverages - the 'non-alcoholic beer' is basically a beer having certain alcoholic strength which is reduced to 0.5% vol or less. It is an admitted fact in the instant case that the impugned product does not contain any alcoholic strength by volume, as it is not fermented and hence the question of reducing the said strength does not arise. Hence the impugned product is neither a beer initially nor it's alcoholic strength is reduced to 0.5% vol. Thus the impugned product does not qualify to be a non-alcoholic beer, but it is a non-alcoholic beverage. Whether the impugned product qualifies to be a malt based beverage or fruit based beverage? - HELD THAT - The %age of Barley malt is less than the mixed fruit juice content in all the product variants. The Ginger lime variant is not considered as its production is discontinued, as per the applicant. Thus it could be inferred that the predominant component of the product is mixed fruit juice content - the contention of the applicant that the product is marketed and understood in common trade parlance as 'non-alcoholic beer' and on this basis alone it deserves to be classified under tariff item 2201 91 00 is not acceptable. The impugned product is a mixture of Barley malt, sugar, mixed fruit juice, hops, lemon extract, carbon dioxide, water, flavor other additives and Black carrot juice, amongst which the predominant is mixed fruit juice, in all variants of the product. Thus the product needs to be classified on the basis of predominant material/substance in terms of Rule 2(b) of General Interpretation Rules. Further all the variants of the product are admittedly carbonated and hence they are nothing but carbonated beverages - all the variants merit classification as carbonated beverages of fruit drink, covered under tariff heading 2202 99 90. Accordingly the product attract GST @ 28% along with applicable cess of 12% in terms of SI.No.12B of Schedule IV to the Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, effective from 01.10.2021.

Summary

Issues Involved:

1. Classification of the product "Kingfisher Radler" under the appropriate tariff heading.
2. Determination of the applicable GST rate and compensation cess for the product.
3. Consideration of the product as "non-alcoholic beer" or "carbonated beverages of fruit drink or carbonated beverages with fruit juice."

Detailed Analysis:

Issue 1: Classification of the Product

The applicant, engaged in manufacturing non-alcoholic malt beverages, sought to classify "Kingfisher Radler" under tariff heading 2202 9100 as non-alcoholic beer. The product, containing barley malt and minimal fruit juice, was presented as an alternative to alcoholic beer. The applicant argued that the product, marketed as a non-alcoholic beer, should be classified under this specific tariff heading.

However, the ruling determined that "non-alcoholic beer" refers to beer with reduced alcohol content (not exceeding 0.5% by volume). Since "Kingfisher Radler" contains 0% alcohol and is not fermented, it does not qualify as non-alcoholic beer. Instead, it is a non-alcoholic beverage.

Issue 2: Determination of Applicable GST Rate and Compensation Cess

The applicant contended that the product should attract an 18% GST rate under entry 24A of Schedule III to Notification No.1/2017-Central Tax (Rate), as it falls under tariff heading 2202 9100. The applicant further argued that the product does not qualify as a carbonated fruit beverage or fruit drink under FSSAI regulations due to its low fruit juice content.

However, the ruling emphasized that the product's predominant ingredient is mixed fruit juice, making it a carbonated beverage of fruit drink. Consequently, it falls under tariff heading 2202 99 90. As per entry 12B of Schedule IV to the Notification No.1/2017-Central Tax (Rate), effective from 01.10.2021, the product attracts a GST rate of 28% along with a compensation cess of 12%.

Issue 3: Consideration as "Non-Alcoholic Beer" or "Carbonated Beverages of Fruit Drink or Carbonated Beverages with Fruit Juice"

The applicant argued that the product is marketed and understood in common trade parlance as non-alcoholic beer, thus meriting classification under tariff item 2202 9100. They also referenced judicial precedents and FSSAI regulations to support their claim.

The ruling, however, noted that the product labels describe it as a "Carbonated Non-alcoholic Drink" rather than non-alcoholic beer. Additionally, the General Interpretation Rules for classification were applied, considering the product's predominant ingredient (mixed fruit juice). The ruling concluded that the product is a carbonated beverage of fruit drink under tariff heading 2202 99 90, attracting the specified GST rate and compensation cess.

Conclusion:

The ruling determined that the product "Kingfisher Radler" and its variants are classified as carbonated beverages of fruit drink under tariff heading 2202 99 90. Accordingly, the product attracts a GST rate of 28% along with a compensation cess of 12%, as per entry 12B of Schedule IV to the Notification No.1/2017-Central Tax (Rate), effective from 01.10.2021. The applicant's arguments for classifying the product under tariff heading 2202 9100 as non-alcoholic beer were not accepted.