Consumers can expect the price of their favourite Coke or Pepsi to remain unchanged despite the shift in the GST structure. However, there is ambiguity among certain industry players about the tax rates for fruit-based drinks.
Under GST 2.0, items such as carbonated fruit drinks, caffeinated beverages, fizzy energy drinks, fruit-juice-based fizzy beverages, non-alcoholic flavoured drinks, and all aerated waters containing added sugar or sweeteners will now attract 40% GST and no cess. Previously, it used to be 28% GST plus a 12% cess.
“So, there is no change in the tax rate on carbonated drinks and hence we don’t expect sticker prices to either increase or decrease,” said an executive at a large beverage company.
As per a government release, the tax rate on fruit pulp or fruit juice-based drinks, other than carbonated beverages of fruit drink or carbonated beverages with fruit juice, has been reduced from 12% to 5%. This means prices of beverages like Tropicana juices, Minute Maid, Maaza, Real fruit juices will become cheaper. However, the government is expected to issue a detailed notification on the 40% special rate for select items, likely outlining what qualifies as fruit juice and carbonated fruit beverages. It remains to be seen if the current definition for such products is retained or modified as the government looks to curtail the increasing consumption of unhealthy food and beverage in an effort to curb the growing incidence of diabetes in India.
Emails sent to Varun Beverages, Hindustan Coca-Cola Beverages didn’t elicit any response till press time.
While the industry hailed the reduction in GST rates for fruit-based drinks, they aren’t happy that the GST rates for carbonated beverages were unchanged. They hoped for a lower rate, and for such products to be declassified as ‘sin’ goods.
Days ahead of the GST Council meeting, the Indian Beverage Association placed a plea before the government to not put the carbonated drinks in the sin goods category.
The industry body had proposed a sugar-based taxation model, aligned with global practice, to differentiate low/no-sugar and fruit variants, urging a GST rate reduction on carbonated beverages to 18%.
In terms of the current structure, IBA has flagged concerns related to accumulated cess in their books that will cease to exist effective Sept 22. IBA has requested the government to allow them to utilize it before it expires.
