Beverage industry urges govt to reduce GST rate on aerated drinks, packaged water

By: |
August 24, 2020 7:30 PM

The GST Council is scheduled to meet on August 27 to discuss the compensation payout to states and the opinion of the Attorney General on the legality of market borrowing to meet revenue shortfall

The beverage industry has urged the government to remove aerated drinks from the sin tax category and reduce rate on juice-based drinks under the GST regime. Reduction of taxes on juices would give a boost to local horticulture sector and improve the lives of farmers, from which the industry sources fruits, Indian Beverage Association (IBA) said in a statement.

IBA in a letter to Finance Minister Nirmala Sitharaman, who also heads the GST Council, has suggested placing the packaged drinking water in a lower slab of 12 per cent from the existing 18 per cent. The aerated beverages are currently placed under the highest GST slab of 28 per cent with a compensation cess of 12 per cent. “This high GST levy of 40 per cent on aerated beverages is against the stated policy of the government to maintain parity between pre-GST and GST regimes,” IBA said, adding that aerated beverage is the only product in the entire food category subjected to compensation cess.

It has also urged to revise “the juice-based drinks from the current GST slab of 12 per cent to 5 per cent to give a boost to the local horticulture sector and improve the lives of farmers”. IBA represents the non-alcoholic beverage industry and major industry players including – Coca-Cola India, Pepsico India Holdings, Dabur India, Red Bull India, Tetra Pak India, Pearl Drinks, Bengal Beverages are its members. According to the industry, it has been badly impacted during the March-June period due to COVID-19-induced lockdowns.

Preliminary assessments done by IBA for the full year of 2020 indicates a contraction of around 34 per cent in the industry, which is estimated to be around Rs 70,000 crore. The industry has already suffered losses of around Rs 1,200 crore on account of product/ingredients expiring due to limited shelf life.

“The Indian beverage industry not only suffered in the peak summer months but is expected to suffer in the near future because of a diminished out-of-home consumption which contributes significantly to beverage sales,” the association said. Out-of-home channels, including hospitality, tourism, cinema, railways and airlines still remain restricted. “For this reason, many countries extended relief to their local beverage industry,” it added.

According to IBA, GST rate for chocolates (preparations containing cocoa) was reduced from 28 per cent to 18 per cent. Similarly, other food products like sugar-boiled confectionery have also received GST tax reduction. “Despite several industry requests, however, aerated beverages continue to be in the highest tax bracket. This sector feels that this discriminatory tax treatment needs to be corrected and seeks consideration of the points brought out in this note,” it said, adding that “aerated beverages are not luxury product”.

The GST Council is scheduled to meet on August 27 to discuss the compensation payout to states and the opinion of the Attorney General on the legality of market borrowing to meet revenue shortfall. Besides, a full-fledged meeting of the Council will be held on September 19. Under the GST structure, taxes are levied under 5, 12, 18 and 28 per cent slabs.

On top of the highest tax slab, a cess is levied on luxury, sin, and demerit goods, and the proceeds from the same are used to compensate states for any revenue loss.

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