Section 100 of the CGST Act, 2017— Classification of Supply by Contract Brewing/Bottling Units– The appellant engaged in manufacture and supply of beer, besides this, has an arrangement with contract brewing/bottling units (CBU) who make the brands of beer of the appellant and supply such beer. CBUs in making the such beer, procure raw materials, packaging materials, incur overheads and other manufacturing costs etc, on their own and sale the beer. The CBUs maintain expenses in their books of account and retain a certain amount of profit. After accounting all these revenues and, the CBUs transfer the balance of amount from the total turnover to the Appellant. The appellant sought ruling from the Authority for Advance Ruling as to whether, sale of beer of brandss owned by the Appellant, manufactured by CBUs, would be considered as supply of services and whether GST is payable by the CBUs on the profit earned out of such manufacturing activity (b) whether GST is payable by the Brand Owner on the surplus Profit transferred by the CBU to Brand Owner. The Authority observed that (a) the CBUs are not engaged in supply of Service to the applicant and therefore no liability to pay GST (b) GST is payable by the Brand Owner(UBL) on surplus Profit and the supply of service to the CBUs is classified under Service Code (Tariff) 999799 and liable to GST at 18% (CGST-9%, SGST-9%) on the amount received from the CBUs. Being aggrieved by the Ruling of the Authority, an appeal was preferred before Appellate Authority for Advance Ruling.

Held that:- The Hon’ble Appellate Authority for Advance Ruling, modified the Ruling of the Authority as (a) The activity of Appellant by way of granting the CBUs the representational right to manufacture and supply beer bearing its brand name, in return for a consideration, is a supply of service as mandated in Section 7 of the Act read with clause 5(c) of the Schedule II of the said Act. The said supply is taxable under Section 9 of the Act and classified under Service Code 999799 as “other services nowhere else classified”. Further, the amount received by the Appellant from the CBUs under the Agreement, is termed as a consideration for the supply of service and is chargeable to GST at the applicable rate of 18%.United Breweries Limited [2018] 5 TAXLOK.COM 89 (AAAR-Karnataka)