GST ON NON ALCOHOLIC DRINKS

[Dr. Sanjiv Agarwal]

Liquor manufacturing companies in India and world over, do manufacture alcoholic drinks or beverages, bear and even non-alcoholic drinks / beverages. While alcoholic beverages are outside the scope of levy of Goods and Services Tax (GST), non-alcoholic beverages-whether malt based on non-malt based are liable to levy of GST as these are not classifiable under alcoholic beverages, which, of course, are a state subject for the purpose of indirect taxation.

In one of the recent rulings, the Authority for Advance Rulings (AAR), Karnataka ruled that non-alcoholic malt drinks are liable to attract GST @ 28% and Cess @ 12%, i.e. an aggregate tax of 40% on such drinks. [IN RE : M/S. UNITED BREWERIES LIMITED - 2022 (9) TMI 841 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA].

This happened in relation to the product, ‘Kingfisher Radler’ being manufactured by M/s United Breweries Ltd. since 2018 and claimed to be a non-malt based drink and available in different flavours as an alternative to beer.

On a question of whether ‘Radler’ is covered as “carbonated beverages of fruit drink or carbonated beverages with fruit juice” of Chapter heading 2202 or not, and whether the product qualifies to be a non-alcoholic bear or not, it was observed that as per Custom Tariff, in Chapter 2022, 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 was 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. It was therefore held that ‘Radler’ is neither a beer initially nor it's alcoholic strength is reduced to 0.5% vol. and hence the product does not qualify to be a non-alcoholic beer, but it is a non-alcoholic beverage.

On the question of whether ‘Radler’ qualifies as a malt based beverages or fruit based beverage, the Authority observed that the percentage 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 that the product is marketed and understood in common trade parlance as 'non-alcoholic beer' and on this basis alone, it deserved to be classified under tariff item 2201 91 00 was turned down as non-acceptable.

The 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 were admittedly carbonated and hence they were nothing but carbonated beverages. All the variants merit classification as carbonated beverages of fruit drink, covered under tariff heading 2202 99 90.

In conclusion, it was held that such product, ‘Radler’, would 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. The product ‘Kingfisher Radler’ has different variants and all the variants merit classification as carbonated beverages of fruit drink.