Industry to GST Council: Cut tax on aerated beverage, juices, packaged water

Meenakshi Verma Ambwani New Delhi | Updated on August 23, 2020

Industry has suffered losses of ₹1,200 crore due to the lockdown

The Indian Beverage Association has urged the GST Council and the government to stop levying compensation cess on aerated beverages by removing them from the ‘sin’ category.

The non-alcoholic beverage industry body has also urged the GST Council to reduce GST rate on juice-based drinks to 5 per cent from the current slab of 12 per cent and on packaged drinking water to 12 per cent from 18 per cent. The GST Council’s next two meetings are slated for August 27 and September 19.

This development comes at a time when the beverage industry has been adversely hit by disruptions due to the Covid-19 pandemic. Also, the nationwide lockdown coincided with the peak season for the aerated beverage and juice drinks industry.

Members of the body include PepsiCo India, Bisleri International, Dabur India, ITC Ltd, Coca-Cola India, and Hector Beverages.

The letter, which was reviewed by BusinessLine, stated, “Our local industry has been badly impacted this year given that the peak months of March to June which contribute to over 50 per cent of annual volumes, have been lost due to Covid-19 lockdowns. Preliminary assessments done by IBA for the full year of 2020 indicate that our ₹70,000 crore (per annum) industry is estimated to contract by 34 per cent versus 2019.”

It said industry has already suffered losses of about ₹1,200 crore on account of expired products and ingredients due to limited shelf life and is expected to suffer in the near future too because of “diminished out-of-home consumption which contributes significantly to beverage sales”.

“The Indian beverage industry needs fair, non-discriminatory and reasonable tax treatment to survive through this unprecedented economic and health crisis,” the letter stated.

The beverage industry body has argued that the GST levy of 40 per cent on aerated beverages (28 per cent GST + 12 per cent compensation cess) is against the “stated policy of the government to maintain parity between pre-GST and GST regimes”.

The industry body said that aerated beverages are not a luxury product and serve as one of the cheapest sources of hydration and refreshment in the country. It added that it is also “not a sin product” since ingredients used in these beverages are completely safe.

Local sourcing

Saying that the industry has almost a 100 per cent local value chain, it argued that its member companies are among the highest procurers of Indian farm produce and have built local and hyper local supply chain and production facilities across India.

Stating that the Indian beverage industry plays a critical role in generation of direct and indirect employment and helps increase farmers’ income by reducing wastage of fresh fruits, the beverage industry has urged the Council to “extend the preferential tax treatment to the entire chain, starting from cultivation to the processing of fruits”.

It also said that the NARTD beverages contribute a significant share to revenues of the small retail outlets.

Published on August 23, 2020

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