The Indian Beverage Association (IBA), based in New Delhi and representing major companies such as Coca-Cola, PepsiCo, Red Bull, and Dabur, has called upon the government to exempt carbonated drinks and juice-based beverages from “sin taxes,” or taxes imposed on products considered unhealthy. In letters addressed to the Ministry of Finance, the Ministry of Food Processing Industries, and the GST Council Secretariat, the industry group expressed concerns over the negative perception created by the current GST classification of these products.
Currently, all carbonated drinks, regardless of their nutritional content or sugar levels, are categorized as sin goods, alongside alcohol and tobacco, attracting a peak GST rate of 28% plus an additional 12% compensation cess.
The letters highlight that despite the ingredients used and nutritional content, the GST classification of non-alcoholic beverages as demerits or sin goods creates the perception that they are harmful to health. The IBA has actively advocated for a rationalization of GST rates on non-alcoholic beverages to promote faster growth in the sector. The association has made similar representations to various states as well, seeking support for their cause.
The IBA proposes a reduction in the tax rate for carbonated fruit drinks or carbonated beverages with fruit juices from the current 28% GST plus 12% compensation cess to 18% GST. The association argues that evidence does not support the notion that higher sin taxes effectively change behaviour. It further states that singling out carbonated fruit drinks for higher taxation is an inadequate solution to the issue of obesity, as these beverages contribute only a small proportion of calories to the average diet. Moreover, the IBA alleges that other unhealthy products like sweets and chocolates attract significantly lower GST rates.
The IBA’s letters emphasize the need for a fair and rational approach to taxation, considering thenutritional aspects and overall impact of various products rather than solely relying on the “sin” label.