The Government has issued Notification No. 01/2026-IGST (Rate) revising HSN classifications for beverages under GST. This amendment primarily impacts products falling under the 2202 series, affecting their tax treatment and classification.

🔍 Key Changes Introduced

As per the notification, amendments have been made in Schedule I (5% GST) and corresponding alignment in Schedule III (higher rate category).

📌 Affected Product Categories (HSN 2202 Series)

The revised classification broadly covers:

• Non-alcoholic beverages

• Fruit-based drinks and beverages (excluding 100% fruit juice)

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• Aerated drinks and flavoured beverages

• Ready-to-drink (RTD) beverages

👉 These products typically fall under HSN 2202, which includes waters, beverages, and other non-alcoholic drinks.

⚖️ Tax Rate Implications

🟢 Schedule I (5% GST)

• Certain beverage products under HSN 2202 continue to attract 5% GST, subject to classification and composition.

🔴 Schedule III Alignment (Higher Tax Category)

• Specific entries relating to:

  • Aerated beverages

  • Sweetened or flavoured drinks

👉 These may attract:

• Higher GST rates (up to 28%), and

• Compensation Cess, depending on product nature

This alignment ensures consistency between classification and applicable tax rates.

🧠 Practical Impact for Businesses

1. Correct Classification is Critical

• Businesses must carefully evaluate whether products qualify under:

  • Low-rate category (5%), or

  • Higher-rate category (28% + cess)

2. Product Composition Matters

• Key factors include:

  • Sugar content

  • Aeration

  • Fruit content vs artificial flavouring

3. Risk of Litigation

• Misclassification can lead to:

  • Tax demands

  • Interest and penalties

4. Impact on Pricing & Margins

• Higher tax incidence may:

  • Increase product prices

  • Affect competitiveness

📌 Compliance Action Points

Businesses dealing in beverages should:

• Review HSN classification of all SKUs

• Reassess tax rates applied in invoicing

• Update ERP / billing systems

• Maintain product composition documentation

• Seek clarity where classification is ambiguous

📢 Conclusion

The amendment under Notification No. 01/2026-IGST (Rate) reinforces the importance of accurate HSN classification in GST compliance. With varying tax rates across beverage categories, businesses must ensure proper classification to avoid disputes and financial exposure.

For expert guidance on this topic, contact your tax professional today.