The Indian Beverage Association (IBA) has raised concerns over the current 40% GST levied on aerated beverages, calling it a significant bottleneck for the industry's growth. Amid speculations that the Group of Ministers (GoM) on rate rationalization has proposed increasing the GST on sin goods, including soft drinks and tobacco, to 35%, the IBA expressed apprehension about the potential impact on investments and industry expansion.
Call for Relief in Taxation
Speaking at an event on Wednesday, the IBA Vice Chairman highlighted the strain that high taxation places on the sector, saying, "Taxation remains the biggest bottleneck for the aerated beverage sector. We cannot afford even half a percent increase and have been urging for relief. When the 12% cess is scheduled to end in 2026, we hope to return to the 28% GST level."
Despite growth in the sector, he noted that it remains limited to single digits due to price sensitivity among consumers.
Appeal for Lower GST on Low-Sugar Beverages
The IBA reiterated its long-standing demand for lower GST slabs on beverages with low, moderate, or zero sugar content. The Vice Chairman pointed out that even zero-sugar beverages are taxed at 40%, emphasizing that taxation should be rationalized to encourage healthier options and stimulate industry growth.
J.P. Meena, Secretary General of IBA, reacted to the speculation around the proposed 35% tax slab, stating, "The reported 35% tax slab will burden the industry, impacting its ability to attract investments. However, if the cess is removed, there is potential for the industry to expand and bring in new investments."
Government Response
The Finance Ministry addressed media reports regarding the GoM's recommendations, calling them "premature and speculative." The ministry clarified that the GST Council has not yet deliberated on any changes to GST rates.
Industry Outlook
The beverage sector remains hopeful for a more favorable tax regime post-2026 when the GST compensation cess is expected to end. Industry stakeholders believe that lower taxation would not only support growth but also align with the government's efforts to promote healthier consumption and attract new investments.
The IBA&rsquo's appeal underscores the need for balanced policymaking that addresses the dual objectives of public health and economic development while ensuring industry sustainability.
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