In a significant ruling, the Gauhati High Court has directed that fruit-based carbonated drinks be taxed at a lower 12% GST rate instead of the previous 28%, offering relief to consumers and manufacturers alike.
The ruling came in favor of X’SS Beverage, a manufacturer of carbonated juice drinks, which had been contesting a hefty tax demand that included penalties and interest. The court’s decision is expected to reduce the prices of popular juice-based fizzy drinks in the market.
The GST authorities had previously classified these beverages under the 28% tax slab applicable to soft drinks, arguing that their carbonated water content justified the higher rate. However, X’SS Beverage successfully argued that fruit juice was the primary ingredient, giving the product its essential character and qualifying it for the lower 12% GST rate.
The court referred to the Rules for Interpretation of the Customs Tariff Act, 1975, which guides product classification based on a product’s essential nature when it does not fit neatly into a single category. The judgment also cited past rulings, including a case involving Parle Agro’s ‘Appy Fizz’, further strengthening the argument for a reduced tax rate.
Legal experts believe this ruling will set a strong precedent for future disputes regarding the classification of carbonated fruit drinks. “The court rightly examined key aspects such as ingredient composition, manufacturing process, product marketing, and labeling to reach its decision,” said Harpreet Singh, Partner, Indirect Tax, Deloitte-India.
This ruling is expected to make fruit pulp and juice-based carbonated beverages more affordable while providing financial relief to beverage manufacturers burdened by high taxes.