The Indian Beverage Association (IBA) on Monday called for a rationalisation of the Goods and Services Tax (GST) structure on non-alcoholic beverages, proposing that taxes be levied based on sugar content.
The association believes that, with supportive policies, the sector could grow to an estimated size of Rs 1.5 lakh crore by 2030.
At the release of a report by the Indian Council for Research on International Economic Relations (ICRIER) focusing on tax policy for carbonated beverages in India, IBA Secretary General J.P. Meena stated that non-alcoholic beverages are a vital component of India’s food processing sector and could play a significant role in establishing the country as a global manufacturing hub.
Meena emphasised the need for a uniform 5% GST rate on bottled water, regardless of bottle size, instead of the current rates of 12% for 20-litre bottles and above and 18% for smaller bottles. He argued that such changes would encourage greater private sector participation in the supply of portable water across India.
“The non-alcoholic beverage sector is currently estimated at around Rs 60,000 crore, and with a supportive policy environment, it could reach approximately Rs 1.5 lakh crore by 2030,” Meena told reporters.
He also expressed concerns about the current tax regime, which he described as a significant impediment to growth. When the GST was introduced, non-alcoholic beverages were classified alongside products deemed as "demerit goods," such as tobacco and alcohol, and taxed at the highest rate of 28% plus a 12% cess.
Meena suggested that taxation should be based on sugar content, with higher rates for beverages containing more sugar and lower rates for those with minimal sugar.
The ICRIER report highlighted a global consensus among policymakers on the need for a sugar-based layered tax on carbonated soft drinks (CSDs).
It noted that Indian consumers are becoming increasingly health-conscious and are open to exploring low or no-sugar carbonated beverages and fruit-based options.
“There are significant opportunities for India to expand the manufacture of various types of CSDs, including low-sugar varieties, which could boost revenue, attract investment in manufacturing, and create jobs,” the report stated.
The report argued for an urgent need to implement a layered tax structure that distinguishes healthier products from less healthy options, promoting the production and sale of healthier alternatives.
A lower tax on healthier beverages could reduce prices and increase consumption while encouraging producers to pivot towards healthier production methods.
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