The Indian Beverage Association (IBA) has appealed to the GST Council to reclassify aerated beverages from the current 'sin/demerit' category to the "food/merit" category, placing them under the 18% GST slab instead of the existing 40% tax burden. At present, carbonated drinks attract 28% GST plus 12% compensation cess, equating them with tobacco and pan masala.
The industry body argued that such classification is unfair as aerated beverages do not carry comparable public health concerns. Instead, it has proposed adopting a sugar-based taxation approach, in line with global models, to differentiate between high-sugar and healthier alternatives such as low/no-sugar variants and fruit-based drinks.
IBA has also reiterated its demand to rationalize GST on fruit juices from 12% to 5%, citing the need to boost affordability and demand.
According to IBA, lowering the GST slab on aerated beverages would:
- Improve affordability and spur demand across the mass market.
- Unlock growth across the consumption economy, benefiting distributors and retailers.
- Encourage investment, with the sector already investing Rs 50,000 crore and planning an additional Rs 85,000 crore under the Make in India initiative.
- Support job creation, with the industry already providing 7 lakh jobs, particularly in semi-urban and rural areas.
The association highlighted that the sector is highly price-sensitive, with 71% of transactions at Rs 20 or less, and 65% of consumers from lower socio-economic groups. Given this high price elasticity, it believes rationalizing GST would sustain affordability, drive consumption, and help the industry remain one of the fastest-growing categories in the food and beverage sector, with aerated drinks currently sold across 6 million kirana outlets.
With its appeal, the IBA seeks to reshape the taxation framework to ensure affordability for consumers, fairness in classification, and a boost to India's non-alcoholic beverage market.
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