The beverage industry has called for layered GST on carbonated soft drinks based on sugar content to incentivise consumption and shift production to healthier options. A report released by ICRIER on Monday has recommended a tiered tax structure on soft drinks based on sugar content, stating that soft drinks with moderate or low sugar should be taxed at 18 per cent, while zero sugar soft drinks should be taxed at 12 per cent. The report said this would reduce prices, boost consumption and encourage manufacturers to offer healthier alternatives.
Currently, all types of carbonated beverages are taxed at 28 per cent plus compensation cess of 12 per cent, amounting to 40 per cent tax.
J P Meena, Secretary-General, Indian Beverage Association, said the organised carbonated soft drink market in India is projected to grow to ₹1.5 lakh crore in size by 2030, from the current about ₹60,000 crore. “The sector has immense potential for investment, employment and for strengthening the supply and value chain. Carbonated soft drinks in the country attract the highest slab of GST, effectively 40 per cent. We are calling for evidence-based categorisation of soft drinks for the purpose of GST. A facilitative policy environment is imperative to ensure enhanced investment with ₹80,000 crore investment estimated in the near future for this segment,” he said.
Meena pointed out that nearly 80 per cent of the sector is still unorganised and there is a huge tax revenue leakage for the exchequer. “We believe lowering of taxes will enable formalisation of the sector, which will plug the leakage of tax revenues. Soft drinks are consumed by consumers across the country, including the lower economic group of consumer cohorts. Rationalisation of taxes will enable the carbonated soft drink sector to attract higher investment and creation of employment opportunities. It will also foster innovations and will lead to creation of more start-ups in this sector,” he added.
The ICRIER report said while India is one of the largest global producers of a variety of raw materials used in CSDs, the country is not among the top global manufacturers, and lags behind countries such as Thailand and the Philippines in manufacturing. It recommends a “layered sugar tax that can help increase GST collections, limit the intake of added sugars in beverages, support positive health outcomes and incentivise product reformulations leading to the production of healthier beverages, more investment, job creation and the overall growth of the sector.”
Praveen Khandelwal, National Secretary-General, CAIT said, “The beverages industry contributes to more than 11% sales for small retailers and induces purchases of other items, thereby, significantly supporting the overall retail ecosystem. Hence, a rationalised GST regime assumes an important role in facilitating ease of business and revenue collection. The industry should aggressively take this up with policy makers in the GoM & GST Council.”