Whether Carbonated Fruit Juice falls under Fruit Juices or Aerated drinks?

In re Ms. Rich Dairy Products (India) Private Limited (GST AAR Tamilnadu)

Whether Carbonated Fruit Juice falls under Fruit Juices or Aerated drinks?

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. As discussed in Para 6.2 above, the applicants products are classified under Para 2.3.30 of FSSAI and not para 2.10.6. It is evident that the ‘carbonated water’ described in Para 2.1.0.6 of FSSAI regulations are the ‘Aerated Waters’ covered under CTH 22021010. Therefore, the applicant’s products are not classifiable as ‘Aerated Waters’ under CTH 22021010. Therefore, the products are either classifiable under CTH 22021020 or CTH 22021090 depending on the flavours. The various flavours added by the applicant depend on the fruit juice orange or lemon and added natural and artificial flavours such as ‘orange’, ‘lemon/lime’, ‘cola’, ‘jeer soda’ under various brand names of ‘Richyaa Darner’ and ‘Licta’. ‘Richyaa Darner Lemon’ and ‘Licta Lemon are classifiable under CTH 22021020 as they are lemonade and all others i.e. Richyaa Darner Cola’, ‘Licta Cola’, ‘Richyaa Darner Jeera Soda’, ‘Licta Jeera Masala, Richyaa Darner Orange’ and ‘Licta Orange’ are classifiable as ‘Other’ under CTH 22021090.

The products to be supplied by the applicant are to be classified as ‘Richyaa Darner Lemon’ and ‘Licta Lemon’ are classifiable under CTH 22021020 and all others i.e. ‘Richyaa Darner Cola’, ‘Licta Cola’, ‘Richyaa Darner Jeera Soda’, ‘Licta Jeera Masala, ‘Richyaa Darner Orange’ and ‘Licta Orange’ are classifiable as ‘Other’ under CTH 22021090.

AAAR order-Carbonated beverages with fruit juice classifiable under CTH 22021020 or 22021090

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TAMILNADU

Note: Any appeal against the advance ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated

At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.

M/s. Rich Dairy Products (India) Private Limited, SI No.341 & 342, Akkiyampatty Village, Sendamangapalam Post, Namakkal 637 409. (Hereinafter referred to as ‘Applicant’) is a manufacturer of fruit juices and also carbonated fruit juices. They are registered under GST vide GSTIN No. 33AADCR3175K1ZA. The Applicant has preferred an application seeking Advance Ruling on the following Question:

“Classification of goods manufactured – Whether Carbonated Fruit Juice falls under Fruit Juices or Aerated drinks?”

The Applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.

2. The applicant has stated that

> they are manufacturers of Fruit juices and also Carbonated fruit juices.

> The GST rate @28% and Cess @12 % are applicable only for the goods with description as all goods including Aerated water containing added sugar or other sweetening materials or flavoured. Hence nowhere fruit juices are mentioned.

> Their product Carbonated fruit juices do not fall under the above description of Aerated water containing added sugar or sweetening materials. Nowhere in the description fruit juices are covered

> Also Nowhere the percentage of fruit juices content are given for determination of tax rates whether falls under 28% or 12%.

> In a similar issue during the VAT regime, the Honorable Supreme Court in the case of ‘Appy Fizz’ has given verdict saying that Appy Fizz belongs to fruit juices only and therefore KVAT @ 20% could not be demanded and since fruit juices were involved it can be taxed @ KVAT 12%. The judgment was given to Kerala Sales tax offices.

> The Government of India- Food Safety and Standards Authority of India (FSSAI) has also issued necessary amendment that if the quantity of fruit juice in the beverage is below 10%, but not less than 5% (2.5% in case of lime or lemon), the product shall be called carbonated beverage with fruit juice. Hence it is carbonated beverages with fruit juices only.

> The taxable goods descriptions do not include fruit juices and hence their product falls under the fruit juice only.

> Concentrate of fruit juices content in the carbonated fruit juices manufactured by them is as follows:

Lemon juice-2.5% as per FSSAI norms; other juice- 5% as per FSSAI Norms

3. The applicant was given an opportunity to be personally heard on 09.04.2019. The Authorised Signatory of the applicant appeared for the Hearing. The Assistant Commissioner (ST), Rasipuram also appeared for the hearing. The applicant submitted the written submission giving ingredients, manufacturing process, Composition, test report of FSSAI. They stated that as per FSSAI regulation of 2016, their products are ‘carbonated fruit based drinks’ to be classified under HSN 22029020, taxable at 12% GST. They stated that they will submit extract of 2011 Regulations under FSSAI and photographs of each products showing composition and description.

3.1 In the Written Submission, the applicant has furnished the Profile of the company, Process flow chart, ingredients used in the manufacture of carbonated fruit juices or fruit drinks along with test report, Write up on manufacturing process, Gazette notification issued by FSSAI and Complete set of case laws before the Supreme Court for VAT periods of similar commodity. They stated that the question being asked is whether carbonated fruit juices are classifiable under 22029920 with GST rate at 12%. Their drinks are fruit base drinks and Co2 wart is used for preservation purpose. Fruit pulps are in semi liquid form and fruit juice are in liquid form without any addition of sugar or other additives. There is no difference in the usage of fruit pulp or fruit juices used for manufacture of carbonated fruit juices. They submitted copy of Hon’ble Supreme court judgment in classification of ‘APPY FIZZ’ in case of M/s Parle Agro Ltd vs Commissioner of Commercial Taxes , Trivandrum in the VAT regime where the Hon’ble Supreme court ruled on the classification as per Kerala VAT notifications. They stated that fruit pulp or fruit juice based drinks should be classified under HSN 22029920.

Appy Fizz drink is being sold at 12 % GST and the same should be permitted for their drinks.

They submitted invoices for purchasing ‘Lime Clear Juice’ and ‘Kinnow Clear Juice’ which is classified under HSN 2009. They submitted product specifications of these two inputs indicating that they are of fruit juice (sulphited ) of lime and orange with no added sugar , water except KMS (potassium metabisulfite)

3.2 The Procedure for preparation of carbonated fruit juice submitted by the applicant is as follows:

SUGAR SYRUP UNIT: Few liters of water boiled in sugar syrup kettle, when boiling temperature reached at 70°C, pouring the sugar from the sugar bags in the kettle, after few minutes sugar dissolves then Passes to PHE plate through the filer (PHE plates reduce the temperature of sugar syrup to 35-45°C), to sugar storage tank, when production starts, sugar syrup transferred to blending tank via fine cloth filtration.

BLENDING UNIT: The applicant has planned to prepare each 4.0 KLD which was prepared as 2.0 KL as a single batch. Fruit juices carbonated drink prepared from the juice (Orange,, Lemon, Jeera and Cola). Orange, Lemon, Jeera and Cola consists of Fruit juices, sugar, chemicals and water. After the batch, fruits juice carbonated specification was checked by the quality controller. After that juice will be passed into storage tank through Chiller tank.

CHILLER UNIT: Chiller unit consists of maintaining the juice at less than 5°C temperature.

FILLING UNIT: Q.C. Department checks the temperature of the fruit juices carbonated Drink. After the bottles are sent to the warming tunnel for warming purpose of filled bottles and inspected by the Q.C the bottles are passed to the label machine of the labels. Then labeled bottles are printed to the printing machine (Hereby the Date, MRP, batch no. & Time of bottle Printed in printer) and checked by the Q.C department.

PACKING UNIT: Fruit juices carbonated drink bottles are packed in plastic roll packing (Shrink) and checked by Q.C. The packed bottles placed in trolleys and Transferred to dispatch area, maintain the record for dispatch.

Rinser: Before filling the pet bottle it is rinsed using the RO water.

3.3 The ingredients of the products are as follows:

3.4 The process flow chart for preparation of carbonated fruit juice submitted by the applicant is given below:

CARBONATED FRUITS JUICE PREPARATION CHART

3.5 They submitted copies of test reports of a testing laboratory indicating energy, carbohydrate, total fat, protein, total sugars,. In respect of ‘Lieta Cloud Lemon Carbonate Beverage with Fruit Drink ‘ with fruit juice content is 3.6% ; ‘Richyaa Domer Cloud Lemon Carbonate Beverage with Fruit Drink ‘with fruit juice content is 3.8%; ‘Licta Jeera Soda Masala Flavour Carbonate Beverage with Fruit Drink ‘ with fruit juice content is 3.4%; ‘Licta Orange Carbonate Beverage with Fruit Drink ‘ with fruit juice content is 7.1%; ‘Licta Cola Carbonate Beverage with Fruit Drink ‘ with fruit juice content is 3.5%;’Licta Lemon Carbonate Beverage with Fruit Drink ‘ with fruit juice content is 3.9%;’Richyaa Darner Jeera Soda Masala Flavour Carbonate Beverage with Fruit Drink 1 with fruit juice content is 3.6%;%;’Richyaa Darner Lemon Carbonate Beverage with Fruit Drink ‘ with fruit juice content is 3.4%;’Richyaa Darner Cola Carbonate Beverage with Fruit Drink’ with fruit juice content is 3.2%; Richyaa Darner Orange Carbonate Beverage with Fruit Drink ‘ with fruit juice content is 7.1%; ‘Licta Cloud Lemon Carbonate Beverage with Fruit Drink ‘ with fruit juice content is 3.6%.

4. The applicant further submitted the following additional submissions on 29.04.2019 as undertook by them during the hearing:

a. Details of the content of the ingredients in each product wise

b. Copies of the product wise labels meant for affixture in the bottles in which the beverages is filled for sales, wherein the contents details are printed.

The labels all have the description “Contains Fruit”, and “Carbonated Beverage with fruit Juice” for the products-