Coca-Cola may shut some plants if 'sin tax' imposed

A government-appointed panel examining GST has suggested a higher tax of 40% on some goods including the carbonated drinks Coca-Cola sells

Beverages major Coca-Cola India today said it will have to shut down some factories in India if the government accepts a proposal to impose 40 per cent 'sin tax' on aerated beverages.

This is the first major case of a big company raising red flag against any provision of the proposed GST which is as such stuck in the political deadlock.

"An acceptance of the Arvind Subramanian committee recommendations with regard to GST rate of 40 per cent on aerated beverages, will have a negative ripple effect on the entire beverage ecosystem...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 and South West Asia Vice President, Public Affairs & Communication Ishteyaque Amjad said in a statement.

"Arvind Subramanian Committee recommendations of including soft drinks in the 40 per cent GST category will make our industry unviable," he added.

Reiterating the India is one of its important markets, the company said: "The Coca-Cola Company believes in India and identifies it as one of its strategic growth markets. The Coca-Cola system in India has already invested more than $2.5 billion...Our system is on course to invest another $5 billion in India by the end of 2020."

Last week, a panel headed by Arvind Subramanian had recommended a three-rate goods and services tax (GST) structure of 12-17/18 - 40 per cent, the last category being for products like tobacco and luxury cars.