More reports on: Government policies

Cola industry seeks differential rates of GST to ease tax burden

news
18 March 2017

The aerated beverages industry has sought a differential rate structure for its products as soft drink manufacturers are expected to end up paying more tax once the Goods and Services Tax (GST) rolls out in July.

While a clear picture of the tax structure under the GST regime is yet to emerge, aerated drinks are expected to invite a cess of 15 per cent on the peak GST slab of 28 per cent, effectively paying tax at the rate of 43 per cent ad valorem

The GST Council has decided to cap the cess on aerated beverages and luxury goods at 15 per cent over the expected peak rate of 28 per cent while prescribing cess of up to 290 per on those goods classified as harmful to human health, such as tobacco and its products.

However, for tobacco products that are already taxed at a higher rate, the new tax slab won't have much impact on sales, the cess on aerated beverages could spike their retail prices.

Though a four-tier rate structure for GST has been cleared, the fitments of commodities in these tax slabs would be done only after the next meeting of the GST Council on 31 March.

While the cess on aerated beverages could spike the retail prices, for some organised players in tobacco industry it may not have much impact. However, the actual impact on prices will be known only after the fitment of slabs for these products.

Cola companies now claim that they have brought down sugar content in several products and that such products should be taxed at a lower rate. The soft drink manufacturers, including multi-nationals and domestic companies, have been pitching for a differential GST structure based on sugar or calorie content.

Faced by hazard warnings by health authorities, several countries have started levying higher tax rates, in the form of soda or sugar tax, on aerated drinks forcing companies such as Coca-Cola and PepsiCo to make commitments to cut down on sugar content.

The cess, which would be levied on ''water including mineral water and aerated water'' that contains sugar or added flavouring, is expected to be levied at around 12 per cent.

The aim is to ensure that the tax incidence under GST on specified sin and luxury goods remains at the current levels and also raises receipts to compensate states for revenue loss.

The cess on cigarettes has been capped at Rs4,170 per 1,000 sticks or 290 per cent ad valorem, while on pan masala it is at 135 per cent ad valorem. The cess will be levied over and above the basic GST that will be imposed on these products.





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