IBA seeks lower tax on fruit fizz drinks, sin goods delisting

Currently, carbonated beverages with fruit juice, that are a different category to regular colas or aerated drinks, attract 40% tax, including 28% goods and services tax (GST) and an additional 12% compensation cess. (Bloomberg)
Currently, carbonated beverages with fruit juice, that are a different category to regular colas or aerated drinks, attract 40% tax, including 28% goods and services tax (GST) and an additional 12% compensation cess. (Bloomberg)

Summary

The IBA has recommended bringing the GST down to 12% or 18% to encourage growth in the non-alcoholic beverages sector. The IBA is also in talks with the Food Safety and Standards Authority of India (FSSAI) to differentiate standards for sugar-less and sugary drinks.

New Delhi: Industry body Indian Beverage Association (IBA), which represents interests of the domestic beverage industry, has written to the government, seeking lower taxes on fruit-based fizzy drinks, as well as requesting the removal of such products from the “sin" goods category.

Currently, carbonated beverages with fruit juice, that are a different category to regular colas or aerated drinks, attract 40% tax, including 28% goods and services tax (GST) and an additional 12% compensation cess. IBA has urged the Centre to bring GST down to 12% or 18%. IBA is also in talks with the food regulator, the Food Safety and Standards Authority of India (FSSAI), to differentiate the standards of sugar-less, or sugar-free beverages, and sugary drinks, an executive familiar with the talks between the beverage sector and the regulator said.

In a recommendation, IBA said high taxes on carbonated fruit beverages are an impediment to growth of the non-alcoholic beverages sector, and impact investments. Besides, IBA’s request to remove such drinks from sin products’ list, will help enhance manufacturing for carbonated fruit drinks and attract private investment, it added.

The GST Council in a meeting in September 2021 decided to impose 28% GST, and 12% cess. Earlier, it attracted 12% GST, classifying it as fruit pulp and fruit juice-based drinks. “The sector feels the rate of tax needs a revisit and tax must be rolled back from 40% to previous level of 12%," IBA said.

To be sure many companies such as Coca-Cola, Dabur, and PepsiCo, launched fruit-based drinks to adhere to these new standards following the government’s move to urge soft drink manufacturers to add at least 5% fruit juice in aerated drinks. Additionally, in 2016, FSSAI also released new standards for carbonated beverages with fruit juices. According to the standards, beverages with less than 10% but over 5% fruit juice is qualified as carbonated beverage with fruit juice, while carbonated fruit drinks are required to have fruit juice content of 10% and above (5% in case of lime or lemon juice). These standards were developed to encourage the beverage sector to offer healthier alternatives and aid procurement of fruit produced locally.

However, both carbonated fruit drinks as well as carbonated beverages with fruit juices, were placed in “sin goods" category and liable to GST of 28% with 12% cess.

Fruit juices, on the other hand, attract a GST of 12%. “We have been taking up this issue for quite some time mainly with Ministry of Finance, GST Council Secretariat and Ministry of Food Processing Industries (MOFPI). MOFPI has also supported our demand of rationalization for faster growth of the sector. IBA has also represented to many states on the same line," the executive who did not wish to be quoted said.

Additionally, the IBA is also seeking that taxes on zero sugar or zero calorie aerated drinks be brought down to 18% GST. At present, all aerated waters, containing added sugar or other sweetening matter or flavoured, attract 28% GST plus 12% compensation cess. “The IBA is of the view that the two products—regular carbonated drinks and zero sugar drinks being dissimilar products, the tax rates should also be dissimilar," it said in its representation.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

MINT SPECIALS