The Indian Beverage Association (IBA), representing major players like Coca-Cola, PepsiCo, Bisleri, Dabur, and Red Bull, has formally requested that carbonated drinks not be classified under the proposed 40% “sin goods” GST slab. Instead, the association proposes inclusion in the standard 18% GST tier to promote affordability and correct classification.
Current Tax Structure & Proposed Changes
At present, aerated beverages attract a combined 40% effective tax, comprising 28% GST plus a 12% compensation cess. The government is considering a simplified GST regime that includes 5% and 18% standard slabs alongside a 40% rate for sin or luxury goods.
Industry’s Arguments
- Mass consumption and price sensitivity: Carbonated drinks are highly price-sensitive—most purchases fall under ₹20—and predominantly consumed by lower-income groups.
- Healthier variants penalized unfairly: Zero- and low-sugar options, and fruit-based drinks, are lumped into the 40% category despite offering healthier alternatives
- Fiscal benefit over time: While rationalizing the rate to 18% may reduce revenue by ₹277 crore initially, the industry forecasts a revenue surplus of ₹32–591 crore annually post-2025 due to increased compliance and consumption.
- Economic growth potential: The IBA claims that aligning with an 18% slab could unlock ₹50,000 crore in investments, generate 1.2 lakh jobs annually by 2030, support farmers with stable procurement (e.g., sugar, mango), and formalize a largely unorganized sector.
Strategic Implications
- Fair classification: Declassifying aerated beverages from the “sin goods” category means equitable taxation that respects consumer and producer dynamics.
- Boosting sector growth: Reduced tax burden may drive formalization, investments, and job creation across the beverage value chain.
- GST reform opportunities: The appeal aligns with broader tax reform presented by the government—including the proposed two-slab GST regime and sin-goods levy—highlighting the need for nuanced policy application. The Economic Times
What Comes Next
The final decision on slab allocation and rate rationalization will be made by the GST Council, likely during its upcoming meetings following the 56th GST Council session in mid-August. At that time, both consumer welfare and revenue implications will be central to policy deliberations.
