Alcoholic Liquor is not food’ or food product and job work related with manufacturing of such beverage will attract Goods & Services Tax (GST) at the rate of 18 per cent, Andhra Pradesh High Court has said. This rate will be levied retrospectively.

“It cannot be treated as an item of food for many a reasons, particularly, for the advertisements carried on the item that its consumption would be injurious to health, etc,” a division bench of Justices C Praveen Kumar and A V Ravindra Babu said while dismissing writ petition filed by Tirupathi based Esveeaar Distilleries Ltd , the company known for ‘McDowell’ brand of alcoholic beverages like rum, whisky and brandy

Custom tariff Act

Further, the bench said alcoholic liquor for human consumption does not constitute food or food product under Custom Tariff Act. It held that the petitioner is liable to pay tax at the rate of 18 per cent in terms of notification (No.6/2021, dated September 30, 2021). It is also to be noticed that at no point of time, any exemption was specifically granted to alcoholic liquor for human consumption. Neither the notification nor the items mentioned in Custom Tariff Act spell out alcoholic liquor for human consumption as food or food product. 

“The petitioner, on its own, has been claiming exemption, which lead to issuance of notification No.6/2021. Though the same was published in Gazette on September 30, 2021, this being clarificatory in nature, it has to be retrospective in operation,” the bench said in recent ruling. Earlier, Maharashtra’ Appellate Authority for Advance Ruling (AAAR), in the case of  Crown Beers India Ltd had held that job work of liquor does not qualify for a reduced rate of GST at the rate of 5 per cent as it cannot be categorised under food and food products.

The company purchases extra neutral alcohol from various distilleries, food flavours, special spirits and caramel from registered dealers situated within Andhra Pradesh as well as from dealers located outside the State. After an assessment for the tax period of 2017-2018, 2018-2019 & 2019-2020, Tax Department raised a demand for around ₹25 lakh (including of penalty and interest).  This was challenged by the company on the ground that the job work charges relatable to manufacture of alcoholic liquor at the rate of 18 per cent against 5 per cent is illegal and contrary to law.

Sandeep Sehgal, Partner-Tax, AKM Global, a tax and consulting firm feels the judgement of the Andhra Pradesh High Court seems to be well reasoned. “In ordinary parlance, alcoholic liquor cannot qualify as ‘food or food products’. The court has stated it clearly and also upheld the relevant notification stating it is clarificatory in nature,” he said.

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