GST rates: Aerated drinks to attract 40% tax, industry body upset

Sweetened aerated water and flavoured water will attract a total duty of 28%—40% tax and 12% additional cess, according to the proposed GST rates


At present, tax on aerated beverages varies from state to state. While it is below 28% in most of the states, in states like Punjab it is as high as 43%. Photo: Mint
At present, tax on aerated beverages varies from state to state. While it is below 28% in most of the states, in states like Punjab it is as high as 43%. Photo: Mint

New Delhi: Come July, consumers will have to pay more to quench their thirst.

Sweetened aerated water and flavoured water will attract a total duty of 40%—28% tax and 12% additional cess, according to the proposed goods and services tax (GST) rates which will kick in on 1 July.

At present, tax on aerated beverages varies from state to state. While it is below 28% in most of the states, in states like Punjab it is as high as 43%.

The beverage industry is disappointed as it had been lobbying for a much lower tax slab.

Indian Beverages Association (IBA), which lobbies for beverage makers like Coca-Cola India, PepsiCo India Holdings Pvt. Ltd, Dabur India Ltd, Red Bull India Pvt. Ltd and Pearl Drinks Ltd, among others, said it was “extremely disappointed”.

“The effective tax rate of 40% on these products under the GST regime is against the stated policy of maintaining parity with the existing weighted average tax which is significantly below 40%. This increase will have a negative ripple effect and hurt the entire ecosystem of farmers, retailers, distributors and bottlers in India,” said Arvind Varma, secretary general, IBA.

According to Verma, imposition of cess on non-aerated flavoured water and nutrition drinks is “not in line with the stated intentions of levying cess only on aerated drinks”.

“IBA hopes for reconsideration of the rate of cess on aerated drinks besides having a lower rate for non-sugar sweetened drinks, nutrition beverages and aerated beverages that contains fruit juice and expects a positive outcome from the government,” IBA said in a statement.

According to estimates by Euromonitor International, a market research firm, India’s carbonated beverages market is projected to grow at about 3.7% every year between 2017 and 2021. According to a different study by research firm Nielsen, Indians consumed about 5.9 billion litres of soft drinks in 2015.

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