The G20 Leader’s Declaration under India’s presidency noted that only 12% of the targets set under the United Nations’ Sustainable Development Goals (SDGs) have been met. Good health and well-being (Goal No. 3) and ensuring safe drinking water (No. 6) are two important SDGs on which India seems to be lagging. We face a huge challenge in keeping our population healthy. On one hand, there is malnutrition, and on the other, the incidence of non-communicable diseases (NCDs) is rising. A study by the Indian Council of Medical Research (ICMR) on diabetes found that in 2021, an estimated 101 million people in India were diabetic, while an estimated 136 million were pre-diabetic. The count of diabetics increased by 44% over the covid pandemic from 70 million in 2019. The International Diabetics Federations’ India Diabetes Report 2000-2045 called India the “diabetes capital of the world’, with 17% of the global diabetic population. It said that by 2045, 135 million Indians will suffer from diabetes. The illness can adversely impact various organs of the body, leading to huge healthcare costs for the government if no action is taken.
The G20 Leader's Declaration under India's presidency noted that only 12% of the targets set under the United Nations' Sustainable Development Goals (SDGs) have been met. Good health and well-being (Goal No. 3) and ensuring safe drinking water (No. 6) are two important SDGs on which India seems to be lagging. We face a huge challenge in keeping our population healthy. On one hand, there is malnutrition, and on the other, the incidence of non-communicable diseases (NCDs) is rising. A study by the Indian Council of Medical Research (ICMR) on diabetes found that in 2021, an estimated 101 million people in India were diabetic, while an estimated 136 million were pre-diabetic. The count of diabetics increased by 44% over the covid pandemic from 70 million in 2019. The International Diabetics Federations' India Diabetes Report 2000-2045 called India the "diabetes capital of the world', with 17% of the global diabetic population. It said that by 2045, 135 million Indians will suffer from diabetes. The illness can adversely impact various organs of the body, leading to huge healthcare costs for the government if no action is taken.
Focusing on sugar intake and its link to diseases like diabetes, the World Health Organization (WHO) recommends reducing the intake of free sugars to less than 10% of one's total energy intake. Given the routine consumption of sugar as part of daily diets and its high content in products like sugar-sweetened beverages (SSBs), many countries have designed taxes linked to sugar content. The assumption is that a sugar levy will make sugar-rich products dearer, reduce their consumption and encourage companies to cut the sugar content in their products for a lighter tax burden. In the UK and elsewhere, some companies have re-formulated their products with reduced sugar to qualify for lower tax slabs. They have been innovative in doing so, showing that health-oriented research and development can aid the growth of beverage markets.
The most common food category facing sugar-linked taxes globally is that of SSBs, which include products like carbonated or non-carbonated soft drinks, fruit or vegetable juices and drinks, liquid and powder concentrates, flavoured water, energy and sports drinks, ready-to-drink tea, ready-to-drink coffee and flavoured milk-based drinks. Analysing the tax regimes of 122 countries (on World Bank information), my team and I found that SSB taxation in most countries has slabs based on both the sugar content and volume of beverages. Policymakers tend to make distinctions between beverages with high sugar, low sugar and no sugar, and tax them accordingly. Around 99% of SSB taxes are imposed on carbonated and energy drinks that are high in sugar. About 75% of excise taxes cover low-calorie sweetened beverages, while around 78% apply to concentrates, 43% to sweetened milk-based drinks and 38% to unsweetened 100%-pure juices. In most countries, beverages that have additional nutritive properties (such as pure fruit juices and unflavoured milk) seem to be excluded from sugar-linked taxation policies. Given SDG No. 6, the least taxed are packaged water, natural or mineral water and source water, table water and soda water without added sweeteners of any kind. If properly designed, global studies show that SSB taxes have many benefits, including increased tax revenues, better health outcomes, faster product re-formulations and enlarged export opportunities.
While India's GST was a path-breaking tax initiative, the country is yet to levy a layered sugar tax on SSBs. There is GST of 28% plus a compensation cess of 12% on zero sugar aerated water, and all carbonated beverages face a steep 40% tax irrespective of their sugar content. High taxation in general means that startups are unable to penetrate the carbonated beverages market and our exports suffer as well.
In a country that is short of clean and safe drinking water, high taxes push bottled water out of the reach of large numbers. Bottled water faces a tax of 18% in a pack of under 20 litres and 12% if it is in a bigger package. Compared to water, a juice with high sugar is taxed at 12% and a high-sugar milk-based drink at only 5%. If packaged water is found more expensive than juice or milk, people may consume more of the latter than they should.
In every category, be it carbonated beverages, juices or milk, there are high-sugar and low-sugar products that could be taxed at different rates. A 100% juice or a milk drink with no added sugar can be more nutritious than water, for example, and hence these face low taxes in many countries.
In India, high taxes on water have led to the growth of a large counterfeit market, which does not pay tax. An estimated 80% of all beverages produced in the country are in the informal sector, which doesn't pay tax either. Investment in the beverages industry is low as it faces one of the highest GST rates globally. In spite of being among the top producers of milk, fruits and vegetables, India ranked 15th last year in terms of revenue generated from the beverages sector. The country is not among the top 50 exporters of beverages and one of the reasons for this is that global demand is moving towards low-sugar and no-added-sugar drinks.
It is high time that India levies a layered GST on beverages based on sugar content: high sugar-high tax (28%); low sugar-low tax (12-18%) and no sugar-lowest/zero tax (zero or 5%), going by current GST rate slabs.