Indian beverage industry urges GST rate cut to boost sector growth

The Rs 60,000 crore Indian non-alcoholic beverage sector, represented by companies such as PepsiCo, Coca-Cola, Bisleri, Tata Group, and Campa (Reliance Industries Ltd), has formally appealed to the government for urgent tax reform, according to reports by CNBC-TV18.

In letters to the Finance Ministry, the GST Council, and a GST-Council-nominated Group of Ministers (GoM) on rate rationalisation, the industry has outlined the detrimental effects of high GST rates on the sector.

In an exclusive interview with CNBC-TV18, CK Jaipuria, Chairman of the Indian Beverage Association (IBA), emphasized the need for immediate action. He labelled the existing tax structure as "retrograde" and noted that the high rates place a significant burden on the rapidly growing industry, which is expanding at a rate of 14% annually.

The industry has proposed lowering the GST on essential items like bottled water, currently taxed at 18% and 12%, to 5%. "Water is a necessity," Jaipuria remarked, adding that the government itself procured bottled water for disaster relief efforts, underscoring its importance. "A reduction in tax would allow us to pass on the benefits to consumers."

Jaipuria also called for a GST reduction on fruit juices, currently taxed at 12%, to 5%, in line with food items. He recalled the Prime Minister's earlier push for the beverage industry to increase its procurement of fruits to support farmers, stating that the sector has yet to see the promised tax relief despite increasing fruit content in beverages.

For carbonated drinks, which are taxed at 28% with an additional 12% cess, the industry has requested a reclassification. "Carbonated drinks should not be treated as sin goods like alcohol and tobacco," Jaipuria argued. He urged the government to reduce the overall tax burden on these products to 18%.

The GoM meeting, scheduled for today in Goa, may address these proposals, but the outcome remains uncertain.