November 4, 2016

The Indian Beverage Association (IBA) is disappointed at the re-categorization of aerated drinks under the demerit/luxury category under the GST rate slabs announced by the GST Council yesterday.

At Rs. 10/- for 200 ml, aerated drinks are neither luxury goods nor do they carry the kind of health hazards attributed to them. The issue of negative externalities around aerated drinks has already been laid to rest and IBA reiterates that:

1. Aerated Drinks are not ‘sin’ goods as the Union Government itself had accepted the position by removing such goods from Schedule VII of the Finance Act, 2005 in the 2015-16 Budget.
2. 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.
3. Aerated Drinks are not ‘luxury’ goods. Aerated Drinks cater to the average hydration needs of Indians in the form of immediately-available hygienic and safe drink source.
4. The consumer base of aerated drinks ranges from the low income group to the high income group. Aerated Drinks are supplied even to rural villages and semi-urban cities.

The Indian Beverage Association wishes to also clarify that currently the incidence of tax on aerated drinks is not 40% as conjectured by some. Currently, for GST purposes, the combination of Central Excise Duty and State VAT in the country is as given below:

*This rate is applicable in the State of Punjab and is levied at the first point of sale only.
The States of Maharashtra, Madhya Pradesh and Rajasthan had raised VAT as late as in the second half of 2015.

It is, thus, evident that over 80% of the States are taxing this category at less than 28% (the highest slab for GST rate).

In the circumstances, when the applicable tax rates on aerated drinks with abatement already stands at an effective 30-31%, the Indian Beverage Association does not subscribe to the recommendation of an additional cess on aerated drinks over and above the 28% GST rate.

This industry is confident that the government will take note of its commitment to the “Make in India” programme launched by the Hon’ble Prime Minister of India — Food Processing and Aerated Beverages have been one of the largest contributors to the FDI in the country — and that we will not be discriminated against in GST. Needless to mention, this increase in taxes will lead to an increase in the price of the soft drinks, restricting the purchase of soft drinks by the general mass, besides providing encouragement to spurious manufacturers to sell their products on the basis of the cost arbitrage.

In these highly difficult circumstances, the Association strongly urges the GST Council to not impose any additional tax burden by way of cess on aerated drinks, which could well amount to being the last straw on the camel’s back. The viability of the industry could be in grave danger because of such a consistent adversarial tax approach.

About IBA:

The Indian Beverage Association aims to bring together all stakeholders to a common platform to promote growth of the non-alcoholic beverage industry. As a forerunner in the sphere, it acts as a common voice for the industry and plays a significant role in the growth of this sector, a sector that drives the economy by providing employment opportunities and driving income growth.

The Association serves as an inter-face between the industry, the government and the public, besides providing a unified and focussed viewpoint on legislative and regulatory matters. IBA aims to facilitate the framing, development and dissemination of best practices related to the environment, quality, manufacturing and other relevant areas, with the objective of continuing the manufacture and supply of safe, healthy and high quality non-alcoholic drinks for the consumers.

The Association also aims to pro-actively interact with the Central and State Governments and other apex industry chambers for the formulation of policies and rules that may help promote and protect the interests of the non-alcoholic beverage industry in its endeavour to serve the nation.

The Indian Beverage Association comprises leading members of the beverage industry such as FieldFresh Foods (Del Monte), Red Bull India, Coca-Cola India, Pepsico India, Dabur, Mondelez India , Tetra Pak India, Bengal Beverages, ISDMA, Pearl Drinks, Britannia Dairy, Narang Danone Access, Reliance Industries, Manjushree Technopack, Parle Agro, Krones India, Kali Aerated Water Works, Hindustan Coca Cola Beverages, Hector Beverages, Britvic India, Lanxess India and Schaefer Systems International and Monster Energy India.

For further information, please contact: Arvind Varma, Secretary General, Indian Beverage Association at