Indian Beverage Association’s JP Meena, ETCFO
The existing GST regime which levies taxation amounting to 40% on carbonated beverages, the highest among packaged foods and beverages, is hampering innovation and growth of the sector, JP Meena, secretary general of the Indian Beverage Association (IBA), which counts Coca-Cola, Dabur, Bisleri, PepsiCo and RedBull as its members, told ET on Monday.
Calling out for evidence-based tax rationalisation and removal of such beverages from sin categories as it amounted to “unfair treatment”, Meena said: “Products with no-sugar or low-sugar, or fruit content – all are being taxed at 40% under the present GST regime.”
He said products with low sugar or no-sugar have not been launched and remain on the drawing board, because of steep taxation. “Innovation within the category can create jobs, help farmers in getting remunerative prices, bring in start-ups and investments in supply chain,” Meena added.
Carbonated drinks in India are taxed at 28% GST plus 12% compensation cess, taking the overall tax at 40%, but are priced Rs 10 onwards. Sweets and chocolates, in contrast, are taxed at anywhere between 5-18%, while in many overseas markets, taxes are differentiated and levied on basis on sugar content in beverages.
Releasing a report on tax policies and the Indian carbonated beverages market, the India Council for Research on International Economic Relations (ICRIER) estimated the market at US $ 18.25 billion in 2022, lower than many other developing countries such as Thailand or the Philippines.
“This report serves as a starting point for discussions on reviewing GST for carbonated products found in the highest tax slab with an additional imposition of sin tax,” Praveen Khandelwal, prominent representative of traders, said.
The IBA has been making such representations in the past as well with all stakeholders, including the Finance Ministry, GST Council and states.
The ICRIER noted in its report that “excessively high GST of 40% is hurting the interests of employment, investment and entrepreneurship”. According to the report, the beverages industry in India has attracted over Rs 50,000 crore of investment in recent years. The market size of the non-alcoholic, ready-to-drink segment can breach Rs 1.5 lakh crore mark by 2030. The sector is also a backbone of the network of kirana shops and retailers in the country, the report added.
The IBA has also called out for lower taxation of bottled water, which is taxed at 18% GST, while juices are taxed at 12%. “Water which is an essential commodity; we do have a problem of safe drinking water. The private sector can play a very important role by providing packaged drinking water,” Meena said.
