31.03.2023: Sugarcane juice not an agricultural produce, to attract 12 per cent GST, rules Uttar Pradesh AAR

Sugarcane juice is not an agricultural produce. Also, it is neither a fruit nor a vegetable, so sugarcane juice will attract GST at the rate of 12 per cent, according to the UP Authority for Advance Ruling (UPAAR).

“Sugarcane juice is classifiable under Chapter 20 and tariff item 20098990,” UPAAR said, while disposing an application by the Lakhimpur Kheri-based Gobind Suaga Mills Ltd. Further, it added that the juice is taxable at 6 per cent CGST (Central Goods & Services Tax) and 6 per cent SGST (State Goods & Services Tax) or 12 per cent IGST (Integrated Goods & Services Tax).

Agricultural produce

The Authority said sugarcane juice cannot be classified as an agriculture produce as such produce should necessarily contain three essential elements. First, it must be produced from the cultivation of plants and rearing of all life forms of animals. Second, it should not require any further processing, or such processing as is done by the cultivators or producers, which does not alter its essential characteristics. And most importantly, the processing should be such that it is usually done by the cultivator, which only helps it attain marketability in the primary market

“In the present case, sugarcane juice is produced by way of crushing sugarcane and, hence, is not produced by the farmer. Also, the process changes its form and constitution, and the changes are of such a nature that it can be marketed in the secondary market and becomes raw material for production of sugar, molasses, ” AAR said while explaining why the said juice is not an agriculture produce.

Further, sugarcane is neither a fruit nor a vegetable. It is usually a type of grass/ plant. It is also not the result of a flowering plant, nor does it develop through seeding. So, sugarcane cannot be considered a fruit. Since sugarcane fibre and stalks cannot be eaten or digested, it does not qualify as a vegetable either. “Sugarcane is neither a fruit nor a vegetable nor a nut, but it is covered under other parts of plants,” it said.

The applicant is a manufacturer of sugar molasses and ethanol. Its main raw material is sugarcane, which is exempted from GST as it is an agriculture produce. The company extracts juice from the sugarcane, which is used for manufacturing sugar, and in that process molasses are a by-product. It pays GST at the rate of 5 per cent on sugar and 28 per cent on molasses. Now, the company wants to sell sugarcane juice to a distillery within the state, which may use it for producing ethanol or any spirit. With this, it moved to know the GST rate on sugarcane juice.

It may be noted that AAR rulings are only applicable on the applicant and the jurisdictional tax office. However, they can be referred in a similar matter in various AAR or courts.

Source: The Hindu Business Line 

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