The Indian Beverage Association (IBA), which represents fizzy drinks makers PepsiCo and Coca-Cola, recently said that they were ‘disappointed’ at the re-categorization of aerated drinks in the luxury category under the GST rate slabs announced by the GST Council on Thursday.
“The viability of the industry could be in grave danger because of such an adversarial tax approach,” the IBA said in a statement.
Both Coca-Cola and PepsiCo have been trying to push affordable packs in order to boost consumption in a category that’s been posting back-to-back low single digit growth, amid growing health concerns of the beverages contributing to obesity.
“At Rs 10 for 200 ml, aerated drinks are neither luxury goods nor do they carry the kind of health hazards attributed to them. Aerated drinks are not ‘sin’ goods as the Union Government itself had accepted earlier and there are observations by the court on the basis of the report of an expert panel that the ingredients present in aerated drinks do not pose any health hazard,” IBA’s statement added.
Existing applicable tax rates on fizzy drinks average 30-31 per cent.
“If there is an additional cess on the category over and above the 28 per cent GST rate, it’s going to have a severe impact, as that will lead to consumer price hikes of as much as 20 per cent and kill the industry,” a cola industry official was quoted as saying.