In re Mohammed Hasabhai Karbalai (GST AAR Gujarat)
What should be the classification and applicable tax rate on the supply of Ready to Serve Fruit Beverage named as ‘Apple Cola Fizzy’ and ‘Malt Cola Fizzy’ made by the applicant under Notification No. 1/2017 – CT (Rate) dated 28.06.2017 as amended up to date?
Apple Cola Fizzyand Malt Cola Fizzyare Carbonated Beverages with fruit juice, classifiable at HSN 22021090. GST is leviable at 28% on said goods and GST Compensation Cess leviable at 12% on said Goods.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, GUJARAT
Mr. Mohammed Hasanbhai Kabalai (hereinafter referred to as the applicant) submits that it intends to supply Thermally Processed Ready to Serve Fruit Beverage. The applicant cites entry 2.3.10 of the Food Safety and Standards (Food Products Standards and Food Additives) Regulation, 2011 for classification of goods. It shall be a ready to serve fruit beverage with different flavours. Presently, the applicant is not registered under GST.
2. The applicant initially intend to supply apple juice based drinks in the name of ‘Apple Cola Fizzy’ and ‘Malt Cola Fizzy ‘. Both the drinks will be apple juice based drinks having same ingredients and manufacturing process, the second one having an added flavour of malt.
3. The applicant has submitted the details of ingredient to be used in their product and manufacturing process of Apple Cola Fizzy and Malt Cola Fizzy.
Ingredients
– Water
– Sugar
– Apple Juice Concentrate (1.9%) [Equivalent to 12.7% Apple Juice Reconstituted]
– Carbon Dioxide (INS290)
– Acidity Regulators [INS296, INS 331 9iii), INS 330]
– Preservatives (INS211, INS224, INS202)
– Antioxidant (INS300)
– Natural Color (150d)
– Added Flavour
Manufacturing Process
a) Drawing of water from bore well or any other source & then collecting it in food graded Storage tank.
b) Then processes shall be undertaken for water treatment wherein water will be passed through pressure sand filter, activated carbon, micron cartridge filter (5 Micron), Reverse Osmosis system, chemical dozer System, ozonisation system & Ultra Violet sterilization system. Then the treated water will be collected in Stainless Steel storage tanks.
c) The treated water will be transferred to blending tank for further processing.
d) Double-refined sugar will be melted in the said tank with treated water. Melted sugar will be transferred through Stainless Steel pump for further processing.
e) Melted sugar shall be passed through sugar filter press, where the suspended impurities (if any) will be removed. The filtered sugar syrup will be then passed through Plate type Heat Exchanger (PHE), where the hot syrup shall be brought down to ambient temperature. Further it will be transferred through transfer pump for processing.
f) The final sugar syrup will be transferred to blending tank for further processing. Natural fruit juice concentrate, different flavours, colours & preservatives of food grade quality are mixed in requisite ratios.
g) The mixture shall be then transferred to blending tank for further processing and in the said mixture fruit juice, sugar syrup & different flavours/preservatives as mentioned above are mixed with agitator to make the final syrup.
h) The final syrup is then transferred through transfer pump for further processing. The same is then transferred to beverage processor, where it is mixed with treated water.
i) This ready beverage is transferred for thermal processing to pasteurizer where it is heated at a temperature of 940C ± 20 The process is also known as pasteurization.
j) Then the product is cooled at 320C and further cooling is completed at 20
k) Then Food grade Co2 is added in this thermally processed beverage.
l) The chilled beverage is then filled in Pet Bottles, automatically on an automatic filling-capping machine. Then the brand labels are pasted on the bottles.
m) The bottles are printed with batch number, date of mfg., etc. These bottles are packed in either carton boxes or P.V.C. shrink film packs and are then stored for dispatch.
4. The applicant submits that it will commercially market the products as Apple Juice based drinks or Fruit Juice based drinks and labels affixed on the product will expressly indicate the same.
5. The applicant has stated that different rate of tax have been charged across the Industry for similar types of drinks with similar ingredients. It submits the names of few leading market makers with name of their drinks and rate of tax charged by them are as follows (illustrative list only, based on information available in public domain)
a. Fresca HazamJeera Soda – 12%
b. Appy Fizz- 12%
c. BisleriSpyci Masala Maar Ke Soft Drink – 40% (with cess)
d. XotikJeeruJeera Beverage- 40% (with cess)
6. The applicant submitted that the difference in rate of tax charged by various other manufactures is quite huge. Charging of 40% rate of tax when competitors are charging 12% makes the product unsellable and whole margin get eaten up subsequently. That in the above background, the applicant is confused and wishes to seeks the classification of the goods which it proposes to manufacture.
7. The applicant has submitted that to determine the classification of ‘Apple Cola Fizzy’ and ‘Malt Cola Fizzy, referred Chapter 22 “Beverages, spirits and vinegar” of the Customs Tariff and the Chapter heading which is relevant to the product is CTH 2202, reproduced as follows: 2202 WATERS, INCLUDING MINERAL WATERS AND AERATED WATERS, CONTAINING ADDED SUGAR OR OTHER SWEETENING MATTER OR FLAVOURED, AND OTHER NON-ALCOHOLIC BEVERAGES, NOT INCLUDING FRUIT OR VEGETABLE JUICES OF HEADING 2009
2202 10 – Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured :
2202 10 10— Aerated waters
2202 10 20 — Lemonade
2202 10 90 — Other
– Other :
2202 91 00 — Non alcoholic beer
2202 99 — Other:
2202 99 10 — Soya milk drinks, whether or not sweetened or flavoured
2202 99 20 — Fruit pulp or fruit juice based drink
2202 99 30 — Beverages containing milk
2202 90 — Other
8. The applicant submits that Chapter Heading 2202 has been divided into two sub- headings, viz. (i)Sub-heading 2202 10 which covers “Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured” and
(ii) Sub-heading 2202 99 which covers “other non-alcoholic beverages”. Fruit pulp or fruit juice based drinks are specifically covered under Tariff Item No. 2202 99 20 under the sub-heading No. 2202 99 as ‘Other non-alcoholic beverages’. Chapter Sub-heading No. 2202 10 covers drinks which are predominantly made up of water, including mineral water and aerated water and are either sweetened or flavoured or both. The applicant submits that drink supplied by them is a “Beverage” but not “Water” and hence cannot be classified under 2202 10 which is for Waters.
9. The applicant has submitted that it intends to sell Ready to Serve Fruit Beverage and it will be clearly highlighted and pointed out on the labels affixed on the packing of the beverages ‘Apple Cola Fizzy’ and ‘Malt Cola Fizzy’. These areReady to Serve Drink and is a Apple Juice based drink i.e. Fruit Juice based drink. Thus it is submitted that intent of the applicant in labelling the product in this manner depicts the fact that the product will be marketed as Ready to Serve a ‘fruit juice based beverages’ only. The products in question will be purchased by consumers considering it as a fruit juice-based drink which shall be in ready to serve state.
10. The applicant has submitted that The Food Safety and Standards (Licensing and Registration of Food Businesses) Regulations, 2011 (hereinafter referred to as the ‘Food Regulations’) have been framed under Section 92 read with Section 31 of the Food Safety and Standards Act, 2006 deals in Chapter II with Food Products Standards. Regulation 2.3 deals with ‘Fruit & Vegetable Products’ and in particular Regulation 2.3.10 deals with ‘Thermally Processed Fruit Beverages/Fruit Drinks/Ready to Serve Fruit Beverages’ while Regulation 2.3.30 deals with ‘Carbonated Fruit Beverages or Fruit Drinks’.
11. The relevant Regulations of FSSAI and the Food category under Appendix A are reproduced as follows:
