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  1. Budget 2018: Why Modi government should tax aerated beverages at 28%

Budget 2018: Why Modi government should tax aerated beverages at 28%

Budget 2018: Aerated beverages were kept in 28 per cent bracket along with a cess of 12 per cent under the Goods and Services (GST) rates.

By: | New Delhi | Updated: January 19, 2018 6:28 PM
budget 2018, budget india 2018, modi governemt, aerated beverages, gst, goods and services tax, pepsi, coca cola, narendra modi, what is gst, Budget 2018: Aerated beverages were kept in 28 per cent bracket along with a cess of 12 per cent under the Goods and Services (GST) rates.

Budget 2018: Aerated beverages were kept in 28 per cent bracket along with a cess of 12 per cent under the Goods and Services (GST) rates. Earlier, the Indian Beverage Association (IBA) had expressed disappointment over the move. Now, FICCI has pitched for removal of Cess of 12% on Aerated Beverages in the upcoming budget likely to be tabled on February 1. “It is observed that the principle of maintaining same or near same tax incidence under the GST regime was not upheld when GST tariffs were rollout on 1st July 2017. Below summary indicates that All India Weighted Average Tax incidence on the Aerated Beverages category witnessed an increase of 53% in 3.5 Years,” FICCI said.

“GST tax incidence as it stands today for Aerated Beverages is a staggering increase of 7% if we take end of FY 2016 as the reference. As per earlier announced principles of fixing GST tariffs, financial year 2015-16 was the base year and businesses were assured that there will be minimal changes in the GST regime,” the industry says. “However, there is a steep 20-21% rise in tax for the category which is already taxed at a high threshold. And prior to FY 2015-16, there was an increase in VAT in the period 2014-15 made by several States to expand their revenue base in light of the upcoming GST regime. Hence the true tax base for consideration for aerated beverages industry is 26% in the GST regime,” the industry body says.

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FICCI has recommended that compensation cess applied on aerated beverages be reviewed and removed under the GST regime and the rate of GST on aerated beverages be fixed at 28%.

Earlier, IBA had claimed that the 12% cess would hurt the growth of the industry. The IBA, which has members like PepsiCo, Coca Cola and Red Bull, had said this increase will have a negative ripple effect and hurt the entire ecosystem of farmers, retailers, distributors and bottlers in India.

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“The IBA is extremely disappointed with sweetened aerated water and flavoured water being placed in the highest tax slab rate of 28 per cent combined with an additional cess of 12 per cent,” the association had said in a statement. It said that the move to impose such high rates ran contrary to the purpose of the GST regime, which is to bring about a taxation system that takes Indias growth story forward, makes products more affordable for consumers. “This increase in tax will further limit the growth of the beverage industry,” IBA had said. It further said the effective tax rate of 40 per cent on aerated drinks is also against the stated policy of maintaining parity with the existing weighted average tax which is significantly below 40 per cent.

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