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Indian Beverage Association expresses disappointment over increased tax rates

Published 08 November 2016

The Indian Beverage Association (IBA) has expressed its disappointment over the government's decision to heavily tax carbonated soft drinks.

The association is disappointed at the re-categorization of aerated drinks under the demerit/luxury category under the GST rate slabs unveiled by the GST Council.

Recently, the GST Council noted that luxury goods such as high-end cars and demerit goods such as tobacco and aerated drinks and will be subject to highest tax rate of 28%, along with additional cess in a manner that the overall incidence of tax will continue to be at the present level.

IBA, which has members including Coca-Cola India, PepsiCo India and Red Bull India among other members, noted that at INR10 ($0.15) for 200ml, aerated drinks are neither luxury goods nor do they pose health hazards.

Aerated drinks serve average hydration needs in the form of being immediately available hygienic and safe drinks source. It also noted that a whole spectrum of consumers in India take aerated drinks ranging from the rich to the poor.

These drinks are also available across several locations including rural villages to semi-urban and in metropolitan areas.

It also said that the tax on aerated drinks was not 40% as expressed by some and said that the actual tax or the total tax incidence is about 42.85%.

In an interview with The Dollar Business, IBA secretary general Arvind Varma said: “If the tax rate is increased steeply, it will adversely affect the industry.

“But I think we need to push our side of the story some more. We don’t know how or what will be the outcome of the exercise we have undertaken until it is completed.”

Varma continued: “If the tax rate is inordinately high it will definitely be a disincentive for the investment. And even those who are in the business now would suffer from disadvantage.”