Non-alcoholic drinks like mojito to attract 40% GST, says WB AAR
The West Bengal Authority for Advance Ruling (AAR) ruled that non-alcoholic beverages such as mojito, rose lemonade, cucumber mint, and lychee vitamin water will attract 40% GST (20% CGST + 20% SGST)
The applicant, Sage Organics Private Limited, had filed an application under Section 97(1) of the CGST Act on December 3, 2025
The AAR classified these beverages under HSN code 22029990, as they do not contain fruit pulp or fruit juice and therefore cannot be classified under tariff item 22029920 (fruit pulp/juice-based drinks)
Iced tea preparations were classified under subheading 210120 at 5% GST (2.5% CGST + 2.5% SGST)
Syrups and beverage concentrates were classified under tariff item 21069019 at 5% GST
GST Rate Structure and the 40% Demerit Rate
India's Goods and Services Tax was introduced on July 1, 2017, replacing a complex web of indirect taxes. The GST rate structure has undergone significant rationalization since its inception.
Key Details
- The original GST structure had four main slabs: 5%, 12%, 18%, and 28%, plus a compensation cess on sin and luxury goods
- Under GST 2.0 reforms effective from September 22, 2025, the structure was simplified to a two-tier system: Merit rate (5%) for essential items and Standard rate (18%) for most goods and services
- A Demerit rate of 40% was introduced for sin goods and super-luxury items, replacing the earlier 28% + compensation cess mechanism
- The GST Compensation Cess was discontinued for all goods except tobacco and related products from September 22, 2025
- The GST Council, chaired by the Union Finance Minister with State Finance Ministers as members, recommends rate changes (Article 279A of the Constitution)
The classification of non-alcoholic beverages under the 40% demerit rate highlights how the new GST 2.0 framework categorizes products -- beverages without fruit content fall under the demerit category alongside aerated drinks, rather than the merit rate applicable to essential food items.
Authority for Advance Ruling (AAR) Under GST
The AAR is a quasi-judicial mechanism under the CGST Act that allows taxpayers to obtain binding rulings on the classification, rate, or tax treatment of goods and services before undertaking a supply.
Key Details
- Established under Section 96 of the CGST Act, 2017; applications filed under Section 97
- Each State/UT has its own AAR, comprising one member from CGST and one from SGST
- Matters covered under Section 97(2): classification of goods/services, applicability of notifications, time and value of supply, input tax credit admissibility, tax liability determination, registration requirements
- Application fee: Rs 5,000, filed in FORM GST ARA-01 on the GST common portal
- Rulings are binding only on the applicant and the jurisdictional tax authority for that applicant
- Appeals against AAR orders lie before the Appellate Authority for Advance Ruling (AAAR), comprising the Chief Commissioner of Central Tax and the Commissioner of State Tax
- AAR rulings are prospective and cannot be applied retrospectively
The West Bengal AAR's ruling demonstrates how the advance ruling mechanism provides certainty on product classification, particularly for new-age beverage categories that do not fit neatly into traditional tariff classifications.
HSN Classification System in Indian Taxation
The Harmonized System of Nomenclature (HSN) is an internationally standardized system for classifying traded products, developed by the World Customs Organization (WCO). India uses HSN codes for both Customs tariff classification and GST classification.
Key Details
- HSN codes in India: 4-digit for businesses with turnover above Rs 1.5 crore; 8-digit for imports and exports
- Chapter 22 covers "Beverages, Spirits, and Vinegar": Heading 2201 (water), 2202 (flavoured/sweetened waters and non-alcoholic beverages), 2203-2208 (alcoholic beverages)
- HSN 22029920: Fruit pulp or fruit juice-based drinks (eligible for lower GST)
- HSN 22029990: Other non-alcoholic beverages not elsewhere specified (attracts demerit rate)
- Classification follows the General Rules of Interpretation of the Customs Tariff Act, 1975
- Correct classification is critical as it determines the applicable GST rate, exemptions, and export incentives
The crux of the ruling was whether non-alcoholic mojito falls under HSN 22029920 (fruit-based drinks, lower tax) or 22029990 (other non-alcoholic beverages, demerit rate). Since these beverages lack fruit pulp or juice, the AAR placed them under the higher-taxed residual category.
- GST rate on non-alcoholic beverages (mojito, rose lemonade, etc.): 40% (20% CGST + 20% SGST)
- GST rate on iced tea preparations and tea extracts: 5% (2.5% CGST + 2.5% SGST)
- GST rate on syrups and beverage concentrates: 5% (2.5% CGST + 2.5% SGST)
- HSN code for non-alcoholic beverages: 22029990
- HSN code for iced tea: 210120
- HSN code for syrups/concentrates: 21069019
- AAR application provision: Section 97(1) of CGST Act, 2017
- AAR application fee: Rs 5,000
- GST implementation date: July 1, 2017
- GST 2.0 simplified structure effective: September 22, 2025