The Indian Beverage Association has proposed a tiered GST structure for carbonated soft drinks, aiming to incentivize healthier consumption. A report by ICRIER suggests that soft drinks with moderate or low sugar should be taxed at 18%, while zero-sugar variants should be taxed at 12%. This recommendation is intended to lower prices, boost consumption, and encourage manufacturers to produce healthier alternatives.
Current Tax Structure and Industry Growth
Currently, all carbonated beverages in India are taxed at 28% GST, plus a compensation cess of 12%, totaling a 40% tax. J.P. Meena, Secretary-General of the Indian Beverage Association, highlighted that the organized carbonated soft drink market is expected to grow from ₹60,000 crore to ₹1.5 lakh crore by 2030. The industry anticipates investments worth ₹80,000 crore in the coming years. Meena stressed the need for evidence-based tax categorization to create a conducive policy environment that can attract investment and strengthen the value chain.
Formalizing the Sector and Reducing Revenue Leakage
Meena emphasized that nearly 80% of the soft drink sector remains unorganized, leading to significant tax revenue leakage. He argued that reducing taxes would help formalize the sector, increase tax compliance, and attract further investments. Rationalized taxes would benefit not just the industry, but also consumers from lower economic groups, driving employment and fostering innovation.
Recommendations for Health and Economic Growth
The ICRIER report suggests that a layered sugar tax would improve GST collection, limit added sugar intake, and promote healthier options. It would also support job creation, encourage product innovation, and spur overall sector growth. Praveen Khandelwal, National Secretary-General of CAIT, stressed the importance of a rationalized GST regime in supporting small retailers and boosting the retail ecosystem.
