GST Update: HSN Code Changes for Beverages (Notification No. 01/2026-IGST Rate)

The GST Council has introduced important amendments impacting the taxation of beverages. As per Notification No. 01/2026–IGST (Rate) dated 30 April 2026, changes have been made to HSN classifications under Schedule I and Schedule III, affecting GST rates on various non-alcoholic drinks.

Background of the Amendment

The notification revises HSN codes under Chapter 2202, which broadly covers non-alcoholic beverages. These amendments aim to bring clarity and alignment in classification and taxation, especially for modern ready-to-drink and flavoured beverage categories.

Key Changes in HSN Classification

1. Schedule I (5% GST) – Revised Coverage

Certain entries under Schedule I (5%) have been rationalized to include specific categories of beverages under the 2202 series:

Non-alcoholic beverages (excluding specific high-sugar drinks)

Fruit-based drinks (not pure fruit juice)

Ready-to-drink (RTD) beverages

Flavoured drinks with lower sugar or non-aerated composition

This ensures that beverages with relatively lower sugar content or non-aerated nature continue to attract a concessional GST rate.

2. Schedule III (Higher Tax + Cess) – Alignment

The notification also aligns certain entries under Schedule III, which attract 28% GST along with Compensation Cess:

Aerated beverages

Sweetened carbonated drinks

Flavoured beverages with high sugar content

These products, often categorized as “sin goods,” continue to attract higher tax rates in line with existing GST policy.

Practical Impact on Businesses

Businesses dealing in beverages should carefully evaluate the impact of these changes:

Correct classification is critical: Minor differences (aerated vs non-aerated, sugar content, composition) can change tax rates significantly

Pricing adjustments: Products moving to higher tax brackets may require pricing revisions

Input Tax Credit (ITC) planning: Changes in output tax rates may impact working capital

Compliance updates: Ensure correct HSN reporting in invoices and GST returns

Key Takeaways

HSN codes under 2202 series have been updated for clarity

Some beverages continue under 5% GST, while others fall under 28% + Compensation Cess

Classification depends on composition, carbonation, and sugar content

Businesses must reassess product categorization immediately

Conclusion

The amendment introduced via Notification No. 01/2026–IGST (Rate) dated 30 April 2026 is a significant step toward streamlining GST classification for beverages. However, it also increases the importance of accurate product classification to avoid tax disputes and penalties.

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