Lobby Group Suggests Fair Taxation Adjustment on Carbonated Drinks in India (Regarding the Indian Beverage Association's proposal for GST modification on fizzy drinks)

In a significant development, the Indian Beverage Association (IBA) has written a letter to the GST Council, urging for the reclassification of aerated beverages from the "sin/demerit goods" category to the "food/merit" category. This move, the IBA argues, would address the current 40% taxation rate that is unfairly high compared to tobacco and pan masala.

The IBA's request is based on several key points. Firstly, the misclassification of aerated beverages as demerit goods fails to acknowledge the industry's significant contribution to employment. The sector provides approximately 7 lakh jobs, particularly in semi-urban and rural areas.

Secondly, the high taxation disproportionately burdens low-income consumers, ignoring healthier alternatives like fruit-based and low/no-sugar variants. About 65% of consumers of carbonated beverages belong to lower socio-economic classes. Moreover, carbonated beverages are highly price-sensitive, with about 71% of transactions at ₹20 or less.

The benefits of lowering the Goods and Services Tax (GST) on aerated beverages are expected to pass on to consumers and increase margins for distributors and retailers. Aerated beverages are sold across 6 million kirana stores and provide high retailer margins of 19-24%.

The IBA also demands a reduction in the GST on fruit-based juices from 12% to 5%. Fruit-based juices, currently taxed at 12%, are proposed to be categorized in the 5% tax slab by the IBA.

The non-alcoholic beverage industry has invested approximately ₹50,000 crore and plans an additional investment of about ₹85,000 crore. The IBA argues that rationalizing the GST slab for aerated beverages will lead to the creation of more jobs.

The IBA suggests a sugar-based taxation approach, in line with globally accepted models, to address this issue. This approach would spur demand, improve affordability, and unlock growth across the consumption economy.

In response to the IBA's letter, the Confederation of All India Traders (CAIT) has issued a statement regarding the reclassification of aerated beverages as "Food/Preferential Category" and the transfer to an 18 percent GST rate to the GST Council.

The IBA's letter was published on August 31, 2025. The outcome of the GST Council's decision regarding the IBA's requests remains to be seen.

Lobby Group Suggests Fair Taxation Adjustment on Carbonated Drinks in India (Regarding the Indian Beverage Association's proposal for GST modification on fizzy drinks)