The biggest roadblock for the industry is the taxation structure and we are hoping that by March 2026 when the 12% cess goes away, we come back to 28%, Indian Beverage Association said
- The biggest roadblock for the industry is the taxation structure and we are hoping that by March 2026 when the 12% cess goes away, we come back to 28%, Indian Beverage Association said
New Delhi: The Indian Beverage Association (IBA) on Wednesday expressed concern over the potential increase in the goods and services tax (GST) rate on aerated drinks. Media reports on Tuesday said a group of ministers (GoM) on rate rationalization has recommended increasing GST on sin goods like aerated beverages, cigarettes, tobacco, and related products to 35%.
Currently, carbonated or aerated beverages, which include low-sugar, fruit-based and flavoured drinks, and zero-sugar aerated water, are placed in the highest slab of 28%, along with a compensation cess of 12%, taking the total tax burden to 40%. This is irrespective of their sugar or fruit content.
"We have zero-sugar products taxed at 40% today. We have made immense representation at all levels to the government, including to the GST Council, met the ministers of the GST Council, but taxation remains to be a bottleneck for us at all levels," said C.K. Jaipuria, vice chairman, IBA said at an industry event.
Premature and speculative?
On Tuesday, the Central Board of Indirect Taxes and Customs (CBIC) said reports of a ministerial panel's recommendations on GST rate changes on certain items, based on its deliberations, are "premature and speculative". The GST Council has not yet deliberated on any GST rate changes and not even received the recommendations of the GoM, CBIC stated.
Companies such as Coca-Cola, PepsiCo, Reliance Consumer Products, Dabur India, Tata Consumer Products sell beverages in India. The industry has been seeking lower tax rates on carbonated beverages.
In 2022 the finance ministry had notified the extension for levy of GST compensation cess by nearly four years till 31 March, 2026. The same was done to repay the loans taken in the last two fiscal years to make up for the shortfall in their revenue collection. Carbonated drinks are subject to a 12% cess over and above the 28% tax rate.
With the extension deadline not too far away, Jaipuria said the 12% cess on aerated beverages should be waived off, effectively taxing the category at 28%. "We cannot afford even half a per cent increase. The biggest roadblock for the industry is the taxation structure and we are hoping that by March 2026 when the 12% cess goes away, we come back to 28% (level)," he said.
The industry has been batting for a taxation system which is "evidence-based, uniform and non-discriminating". "The reported 35% tax slab is a burden on the industry to bring more investments. But if cess is taken away, there is a likelihood of industry expanding and bringing investments," J.P. Meena, secretary general, IBA, told Mint on the sidelines of the event.