Sin tax: Coke says no option but to shut some plants

Makers of carbonated beverages are raising the pitch against a 40 per cent goods and services tax proposed by Chief Economic Advisor Arvind Subramanian. They have said imposing the tax would hurt the Rs 15,000-crore industry.

"It will lead to a sharp decline in consumer purchase, and for a demand-driven industry, it will mean a significant rationalisation of manufacturing capacity. In these circumstances, we will have no option but to consider shutting down certain factories," Coca-Cola India, which has 57 plants and factories in the country, said in a statement today.

PepsiCo and Coca-Cola are the two main aerated drink makers in India. PepsiCo's Chairperson and Chief Executive Officer Indra Nooyi met Prime Minister Narendra Modi on Thursday but it was not clear whether she brought up this issue.

PepsiCo and Coca-Cola committed Rs 61,000-63,000 crore about three years ago to set up new plants in India, increase bottling lines, and improve back-end infrastructure and marketing. These investments would run up to the year 2020, the firms said.

"The demerit or sin tax of 40 per cent is not in line with the 'Make in India' programme launched by the government, which recognises food processing as an important sector," Coca-Cola said.

Carbonated beverage makers are upset at being clubbed with makers of paan masala, tobacco and tobacco products, which, according to the Arvind Subramanian panel on the GST, should be taxed at 40 per cent.

Spokespeople at PepsiCo were not available for their comments. The two cola makers are expected to lobby against the recommendations through the Indian Beverage Association, which is expected to make presentations to the government soon.