GST Update - Tax Changes on Beverages (HSN Revised)

Introduction

The Central Board of Indirect Taxes and Customs (CBIC) has notified amendments to GST rates on beverages under Notification No. 01/2026–IGST (Rate) dated 30 April 2026, effective 1 May 2026. These changes impact classification under HSN 2202, covering a wide range of non-alcoholic and ready-to-drink beverages.

Key Amendments

Schedule I (5% IGST)

Entries under Serial Nos. 150 and 151 have been substituted:

• 2202 99 21, 2202 99 29
• 2202 99 31, 2202 99 39

These cover:

• Non-alcoholic beverages
• Fruit-based drinks and juices (excluding pure juice)
• Flavoured and ready-to-drink beverages

Schedule III (40% IGST + Compensation Cess)

Entries under Serial Nos. 2 and 3 have been revised to include:

• 2202 91 00, 2202 99 91, 2202 99 99

These primarily cover:

• Aerated beverages
• Sweetened drinks
• Certain flavoured carbonated products

This alignment ensures parity across IGST, CGST, and UTGST notifications.

Implications for Businesses

• Higher Tax Burden: Aerated and sweetened beverages may now attract 40% GST plus Compensation Cess, significantly increasing costs.
• Compliance Updates: Businesses must revise HSN classification in ERP and invoicing systems.
• Pricing Strategy: FMCG and hospitality sectors should reassess pricing and margins to absorb or pass on the tax hike.
• Return Filing: Ensure accurate reporting in GST returns to avoid penalties.

Conclusion

This notification marks a significant shift in beverage taxation under GST. Companies dealing in non-alcoholic and aerated drinks must act swiftly to update compliance systems, review pricing, and prepare for higher tax outflows.