INDIA – The Indian Beverage Association (IBA) has called for the rationalisation of the Goods and Services Tax (GST) structure on non-alcoholic beverages, urging the government to implement a tiered tax system based on sugar content.
The association believes this change will unlock significant growth potential for the sector, which could reach a market size of Rs1.5 lakh crore by 2030.
J P Meena, Secretary General of the IBA, emphasized the critical role non-alcoholic beverages play in India’s food processing industry.
He noted that the sector could contribute to making India a global manufacturing hub, provided a more conducive policy environment is created.
Currently, all carbonated beverages are subject to the highest GST slab of 28 percent, along with a 12 percent compensation cess, bringing the total tax burden to 40 percent.
A report from the Indian Council for Research on International Economic Relations (ICRIER) recommends the introduction of a sugar-based tax structure for soft drinks.
Under this proposal, beverages with moderate or low sugar content would be taxed at 18 percent, while zero-sugar drinks would attract a lower rate of 12 percent.
The report suggests that this would lower prices, boost consumption, and incentivize manufacturers to introduce healthier alternatives.
Meena stressed the sector’s untapped potential, stating, “Rationalisation of taxes will attract more investment, foster innovation, and encourage the creation of more start-ups. We estimate Rs 80,000 crore of investment in the near future if the policy framework becomes more supportive.”
He further highlighted that nearly 80 percent of the non-alcoholic beverage industry in India remains unorganised, leading to significant tax revenue leakage. Addressing this gap through a rational tax structure would benefit both the government and industry by driving formalization and increasing employment opportunities.
The ICRIER report also pointed out that while India is a leading producer of raw materials for carbonated soft drinks, it lags behind other countries like Thailand and the Philippines in manufacturing output.
According to the report, a layered sugar tax could help bridge this gap by encouraging product reformulation, boosting GST collections, and promoting positive health outcomes.
Earlier, industry groups like the Retailers Association of India (RAI) and the PHD Chamber of Commerce and Industry (PHDCCI) called for the exemption of bottled water from the 18 percent GST, arguing that it unfairly classifies water as a luxury item alongside other non-alcoholic beverages.
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