The Indian Beverage Association has urged the GST Council to reclassify aerated beverages as “food/merit” category and put them in 18 per cent GST slab.
Currently, aerated beverages are classified as ‘sin/demerit goods’, leading to 40 per cent taxation, which includes 28 per cent GST and 12 per cent compensation cess. It has also reiterated its demand of rationalising GST on fruit-based juices to 5 per cent from the current 12 per cent slab.
It added that lowering of tax rate to 18 per cent GST slab on aerated beverages will improve affordability, spur demand, and unlock growth across the consumption economy. The benefits will pass on to the consumers and increase margins for distributors and retailers, it noted.
The industry body, which represents non-alcoholic beverage industry, pointed out that the sector has invested about ₹50,000 crore and plans an additional investment of about ₹85,000 crore investment reinforcing its commitment to initiatives of ‘Make in India’.
“Carbonated beverages are highly price-sensitive, with about 71 per cent of transactions at ₹20 or less, and about 65 per cent of consumers belonging to lower socio-economic classes. With demand exhibiting high price elasticity, rationalizing GST would help sustain affordability for mass-market consumers,” the industry body stated. Aerated beverages are sold across 6 million kirana stores and provides high retailer margins of 19-24 per cent. It has been one of the fastest growing categories in the food and beverage sector.
IBA added that the industry provides 7 lakh jobs particularly in semi-urban and rural areas, fuelling infrastructure creation and benefiting local economies and rationalising of GST slab will lead to creation of more jobs.
“Currently, aerated beverages are mis-classified as ‘sin/demerit goods’, leading to 40 per cent taxation (28 per cent GST + 12 per cent Compensation Cess). This equates them unfairly with tobacco and pan masala, despite no comparable public health concerns. Such taxation disproportionately burdens low-income consumers and ignores fruit-based and low/no-sugar variants, which offer healthier alternatives. Hence, a sugar-based-taxation approach which is in-line with globally accepted models, should be considered. Fruit based juices currently taxed at 12 per cent should be categorized in the 5 per cent tax slab,” IBA stated in its letter.
