Coca-Cola meets Arvind Subramanian over 'sin tax'

Conveys the levy's adverse impact on aerated drinks sector

A week after chief economic advisor (CEA) Arvind Subramanian recommended a 40 per cent 'sin tax' on aerated drinks under the proposed goods and services tax (GST) regime, clubbing it with other items such as paan masala and tobacco, Coca-Cola reached out to him on Monday.

In the meeting, the multinational beverage company's president for India and south-west Asia, Venkatesh Kini, raised concern over the tax on aerated drinks and the potential adverse impact on the company, as well as industry as a whole, official sources said.

According to the Atlanta-based company, the tax goes against the 'Make in India' initiative, affecting the entire beverage eco-system from the retailers, distributors, transporters to manufacturers, farmers and raw material producers.

Last week, the company had said in a statement that the 40 per cent tax would leave the company with no option but to shut down its factories.

The Subramanian panel recommended a low rate of 12 per cent for certain items, a standard rate of 17-18 per cent for majority of items and 40 per cent sin tax for demerit items. The committee recommended a sin tax be applied to luxury cars, aerated beverages, paan masala, and tobacco and tobacco products (for the states).

Currently, aerated drinks with added sugar draws a central excise duty of 18 per cent and a state value-added tax of 12.5 per cent, making the total indirect tax at 30.5 per cent.

Coca-Cola declined to comment on the matter. "We unfortunately would not like to comment on the issue," a company spokesperson said in response to a questionnaire by Business Standard.

"It (the proposed tax) will lead to a sharp decline in consumer purchase; for a demand-driven industry, it will mean a significant rationalisation of manufacturing capacity," Coca-Cola had said in last week's statement.

Coca-Cola has already invested $2.5 billion in India, establishing raw material supply chain from farmers and producers. It has set up 57 factories, and has three million retailers as well as 7,000 distributors.

"Our system is on course to invest another $5 billion in India by the end of 2020," said the company's website.