Industry body seeks exemption for fizzy fruit-based drinks from sin tax

The IBA is also holding discussions with the FSSAI, to differentiate the standards for sugar-free drinks and sugary beverages

The Indian Beverage Association (IBA), an industry body that represents Coca-Cola, Pepsico, and other beverage firms has urged the government to exempt fruit-based carbonated drinks from the “sin” goods category, according to a report in the Economic Times (ET). Sin goods refer to those goods whose consumption is deemed unhealthy.

At the current moment, all carbonated beverages, irrespective of their content, are placed in the category of sin goods along with alcohol and tobacco, which attract a  rate of 28 per cent plus a 12 per cent additional compensation cess. The IBA has urged the government to cut the goods and services tax (GST) rate to 12 or 18 per cent. The IBA is also holding discussions with the Food Safety and Standards Authority of India (FSSAI), to differentiate the standards for sugar-free drinks, and sugary beverages, ET quoted an executive as saying.

 

The classification of fruit-based fizzy drinks under the GST regime has led to a “negative perception”, the IBA said in separate letters to the ministry of finance, ministry of food processing, and the GST Council Secretariat. The letters come ahead of the GST Council meeting on Tuesday. The letters said that the classification of these products as sin goods has created a perception that non-alcoholic beverages are harmful to health. The industry body also said that high taxes on carbonated fruit drinks are acting as a barrier to the growth of the non-alcoholic beverages segment.

JP Meena, secretary general of the IBA, was quoted as stating that the food processing ministry has supported the body’s demand for rationalisation of GST rates on non-alcoholic beverages for faster development of the sector. The IBA has also made representations to many states on similar lines.

IBA claimed in the letters that facts do not indicate that a higher sin tax has any impact on a customer’s behavior and a higher rate of tax on carbonated fruit drinks is not a solution to the problem of obesity, given the small proportion of calories they contribute in the average diet.