Soft Drink Majors Oppose Excise On 50% Of Mrp

The soft drink industry has reacted sharply to the governments move to levy excise duty on the industry on a rateable value of 50% of maximum retail price (MRP) of the bottles.

Coca-Cola (India) CEO Donald Short met the Central Board of Excise and Customs (CBEC) chairman yesterday to apprise him of the industry mood which is low-beat, following the government decision to change the excise norms.

Pepsi Foods president P M Sinha is expected to meet the chairman today.

Meanwhile, Pepsi has already submitted its representation to the department of revenue in the finance ministry, pointing out the adverse effects of imposing excise on 50% of MRP in the soft drink industry.

 

According to industry sources, between May 1 and August 1 this year, the government has revised the excise levies which resulted in an additional burden of 36% duty on the existing one.

During his meeting with the CBEC chairman yesterday, Donald Short is believed to have conveyed that the Atlanta-based company was in favour of further rationalisation of the excise structure so that the duty burden on the company and its bottlers, which is considerably higher than other consumer product industries, is reduced. At present, a flat rate of 40% excise duty on the assessable value is levied on soft drink bottles.

Pepsi, on the other hand, has requested the government to further revise the excise norms by reducing the present rate of 50% on MRP as the rateable value to 30% of MRP as the value for assessing excise duties to reduce the total cost burden on the producers.

In its representation to the department of revenue, Pepsi has pointed out that soft drink industry is at a disadvantage compared with other consumer product industries, which have also faced a similar excise norm revision.

It has been emphasised that retailer margin in aerated water is as high as 15-16% as compared with 7-8% in other consumer products. Moreover, the sales tax on soft drinks is at least 4-5% more than others in most states.

Besides, bottle breakage amounts to unaccounted losses for the producers. The transportation cost in this industry is higher than others, considering the weight of the products.

All these reasons attribute for higher cost factors on the producer, and given that the overall industry mood is low, the governments move to increase the excise burden is not being welcomed.