12% GST Applicable on Fruit Pulp & Juice-Based Carbonated Drinks, not 40%: Gauhati HC [Read Order]

In a recent ruling, the Gauhati High Court ruled that fruit pulp and juice-based carbonated drinks should be taxed at 12% GST instead of the 40% tax rate imposed by the state tax authorities.

X’SS Beverage Co., a manufacturer of fruit-based carbonated beverages, filed a writ petition against an order by the Joint Commissioner of State Tax, Assam. The dispute arose when the tax department reclassified the company’s products under HSN 2202 10 90 (a category meant for aerated soft drinks) subjecting them to 28% GST and 12% Cess.

GST Compliance Calender from 1-03-2025 to 31-03-2026, Click Here

The petitioner’s counsel argued that their beverages contained fruit juice in compliance with the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011, and should instead be classified under Tariff Item 2202 99 20, which attracts only 12% GST.

Read More: DGFT Extends “Free” Import Policy for Urad Beans Until March 31, 2026

The petitioner’s counsel argued that their classification was legally correct and aligned with past judicial precedents, including the Supreme Court's ruling in Parle Agro (P) Ltd. v. Commissioner of Commercial Taxes, Trivandrum, where fruit-based drinks with more than 10% fruit juice were deemed distinct from aerated soft drinks.

The petitioner’s counsel also argued that they had consistently paid taxes at the 12% rate and had fully disclosed their classification to tax authorities, ruling out any case of suppression or misrepresentation.

Read More: DGFT Amends Export Policy of Broken Rice from Prohibited to ‘Free’ [Read Notification]

The GST department argued that the beverages contained carbonated water, which, in their view, made them liable for taxation under HSN 2202 10 90. The department argued that the petitioner had misclassified the products to evade higher taxes and imposed penalties and interest under Section 74 and Section 122 of the CGST Act.

The bench comprising Justice Soumitra Saikia observed that there was no evidence of fraud, misstatement, or suppression on the part of the petitioner. The court observed that carbonated water was only an additive, not the defining ingredient, and that the fruit juice content in the beverages was substantial enough to qualify them as fruit-based drinks rather than aerated soft drinks.

GST Compliance Calender from 1-03-2025 to 31-03-2026, Click Here

Read More: DGFT Extends Import Period for Yellow Peas [Read Notification]

The court also criticized the tax authorities for disregarding settled judicial precedents and failing to meet the burden of proof in justifying the reclassification. The court set aside the classification made by the GST department, ruling in favor of X’SS Beverage Co., which had challenged the department’s decision to categorize its products under a higher tax bracket.

The court held that the interest and penalty imposed under Section 74 were unsustainable, as the department had failed to establish any intent to evade taxes. The writ petition was allowed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates