IBA Proposes Sugar-Based Tax On Non-Alcoholic Beverages
The Indian Beverage Association (IBA) has urged rationalization of the GST on non-alcoholic beverages, proposing a tax based on sugar content. This shift could boost sector growth from ₹60,000 crore to ₹1.5 lakh crore by 2030. IBA also seeks a uniform 5% GST on bottled water, advocating for a policy that fosters industry expansion and healthier beverage options.
The Indian Beverage Association (IBA) has called for a rationalization of the Goods and Services Tax (GST) structure on non-alcoholic beverages, proposing a tax based on sugar content. This move is aimed at fostering growth within the sector, which has the potential to expand from its current size of approximately ₹60,000 crore to an estimated ₹1.5 lakh crore by 2030, given a supportive policy environment.
During the release of a report by the Indian Council for Research on International Economic Relations (ICRIER) regarding tax policy on carbonated beverages, IBA Secretary General J.P. Meena emphasized the importance of non-alcoholic beverages in India’s food processing industry. He argued that these beverages could play a pivotal role in establishing India as a global manufacturing hub.
Meena also highlighted the need for a uniform 5% GST rate on bottled water, regardless of bottle size, to encourage private participation in providing potable water across the country. Currently, bottled water is taxed at different rates—12% for 20-liter bottles and 18% for smaller bottles—which complicates the market. He pointed out that the non-alcoholic beverage sector currently faces significant challenges due to the existing tax regime, which he described as unfairly punitive.
When GST was implemented, non-alcoholic beverages were classified as “demerit goods” alongside products like tobacco and alcohol, subjecting them to the highest GST rates of 28% plus a 12% cess. Meena advocated for a tax structure that considers the sugar content of beverages, suggesting that those with higher sugar levels should incur a higher GST. This aligns with global trends where policymakers are increasingly supportive of sugar-based taxes on carbonated soft drinks (CSDs).
The ICRIER report noted that Indian consumers are becoming more health-conscious and are showing interest in low or no-sugar carbonated beverages, presenting an opportunity for manufacturers to diversify their product offerings. The report argues that implementing a layered tax based on added sugar content could promote the growth of healthier options, benefiting both consumers and producers.
Lower taxes on healthier products could reduce prices and encourage higher consumption, while incentivizing manufacturers to shift towards producing more nutritious alternatives. In summary, the IBA’s call for a sugar-based tax structure aims not only to boost the beverage sector’s growth but also to encourage healthier consumption patterns among Indian consumers.
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Source: https://www.newsx.com/business/iba-proposes-sugar-based-tax-on-non-alcoholic-beverages/
