Indian Beverage Association (IBA) today said the additional five per cent excise duty announced in the Budget would hit the industry hard and lead to a slowdown in the sector.
The association, which represents FMCG majors like Coca Cola India, PepsiCo India and Dabur, said the duty hike would lead to a price rise by the industry.
"... The additional five per cent duty increase will be tantamount to a 40 per cent increase in the central excise duty which would hit the industry hard and cause a major slowdown at a time when demand growth for the industry has been sluggish," IBA said in a statement.
With the hike in excise duty, the industry will have no option but to increase the price of its products, it added.
Finance Minister Arun Jaitley today proposed to levy an additional duty of excise at five per cent on aerated waters containing added sugar.
The excise duty hike would affect all soft-drink manufacturers in the country.
Terming the hike in excise duty as a 'retrograde budget proposal', IBA said increase in price will also fuel the growth of beverage options from spurious and unorganised sector which, on the one hand, poses significant risk to public health and on the other, will take away tax revenue from the government.
It added that the soft-drinks industry is already one of the highest taxed categories in the country.
"The combined impact of CENVAT and state VAT rates reaches 34 per cent in eight states in the country. Coming on top of the current 12 per cent rate, the additional five per cent duty increase will be tantamount to a 40 per cent increase in the central excise duty," it said.
The association urged the government to reverse the hike, saying the move will retard the progress of an industry which can have a significant positive impact on India's development.
"The carbonated soft-drinks industry is a key segment of the food processing sector in India. It is a significant user of agri products and, with its high labour intensity, contributes significantly to agricultural growth and employment," IBA said.
Coca Cola India sells various carbonated drinks like Sprite, Thums Up and Fanta while rival PepsiCo India markets brands like Pepsi, Mountain Dew and Mirinda in the country.
