Alcoholic liquor not food or food product, job work related to manufacturing to attract 18% GST: Andhra HC

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

“It cannot be treated as an item of food for many 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 the 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 products under Custom Tariff Act. It held that the petitioner is liable to pay tax at 18 percent 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 leads to the 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 a recent ruling. Earlier, Maharashtra’s 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 percent as it cannot be categorized under food and food products.

The company purchases extra neutral alcohol from various distilleries, food flavors, 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 percent against 5 percent is illegal and contrary to law.