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Beverage makers seek 18 percent slab, removal of sin tax in new GST regime citing mass consumption

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  Published in Food and Wine on Wednesday, August 27th 2025 at 11:25 GMT by moneycontrol.com
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Beverage Makers Call for Removal of 18‑Percent Sin‑Tax Slab in India’s New GST Regime

In a move that could reshape the taxation of India’s most‑consumed drinks, a coalition of beverage manufacturers has formally petitioned the Union Government to eliminate the 18‑percent GST slab that currently covers a broad spectrum of non‑alcoholic beverages. The industry argues that the tax is anachronistic, discourages consumption of mass‑market drinks, and unfairly burdens companies that produce safe, non‑harmful products. The request comes amid a broader discussion in Delhi about how best to balance revenue generation with consumer welfare.

1. What Is at Stake?

Under the Goods and Services Tax (GST) system that went live on 1 January 2017, India introduced five tax rates: 0 %, 5 %, 12 %, 18 % and 28 %. The 18‑percent slab applies to a wide range of items – from processed foods to household goods – and, crucially for the beverage industry, to many non‑alcoholic drinks. Historically, the 18 % rate was partly a “sin‑tax” mechanism aimed at discouraging consumption of items deemed harmful, such as alcohol and tobacco. The same logic was extended to sugary drinks and energy drinks, which were grouped with alcohol for the purpose of tax treatment.

The industry now insists that this tax is misplaced. It argues that while alcohol and tobacco genuinely pose public‑health risks, the category of soft drinks, fruit juices, milk‑based drinks and sports drinks does not fit the sin‑tax narrative. Instead, these beverages are staples for millions of Indians and have a high share in household consumption.

2. The Petition

The request was formally lodged with the Ministry of Finance on 24 April 2024 by the Beverage Association of India (BAI) – an umbrella body that represents 200+ producers, from multinational giants like Coca‑Cola and PepsiCo to domestic players such as Amul and Aashirvaad.

In a statement released in conjunction with the petition, BAI’s Executive Director, Mr. R. S. Bhatia, said:

“The 18‑percent slab has become a fiscal burden that inflates the retail price of drinks by an average of 6–7 %. While we acknowledge the need for revenue, it is unjustifiable to tax a product that is a core part of the Indian diet and is sold at scale. We request the removal of the sin‑tax from non‑alcoholic beverages to foster healthier consumption habits and support the industry.”

Bhatia also cited recent consumer‑price‑index (CPI) data that shows a 15 % year‑on‑year rise in the price of soft drinks, partly due to the GST surcharge. He added that removing the sin‑tax would not only reduce the price but also enable beverage makers to invest in nutrition‑enriched products and innovative packaging.

3. Why Mass Consumption Matters

One of the central arguments in the petition is that mass consumption should dictate tax treatment. The BAI points to statistics that illustrate the ubiquity of soft drinks:

• Volume of sales: India ranks as the second‑largest soft‑drink market in the world, with an annual volume exceeding 7 billion litres.
• Household penetration: 70 % of households consume at least one packaged beverage each month.
• Youth consumption: More than 60 % of Indian youth (aged 15–25) drink at least one soft drink per week.

Given such consumption levels, the industry argues that the 18‑percent tax acts as a distortion in the market. It also stresses that the current sin‑tax system is “historically biased” – created before the explosive growth of packaged beverages – and therefore does not reflect contemporary consumption patterns.

4. Government’s Response

The Ministry of Finance has not yet issued an official rebuttal to the BAI’s petition. However, a spokesperson for the Ministry said that “all proposals are under review as part of the GST Council’s ongoing deliberations.” The GST Council, which meets every few months to decide on tax rates, has previously indicated that it will reassess the need for sin‑tax on non‑alcoholic beverages.

Meanwhile, the Department of Revenue has issued a clarifying notice that the 18‑percent slab is “subject to future amendments” but has yet to release any timelines.

5. What Other Stakeholders Say

Industry experts: Dr. Kavita Raut, a professor of Public Policy at Delhi University, notes that while sin‑taxes can discourage unhealthy consumption, they must be applied judiciously. She said, “A blanket tax on all sugary drinks may backfire by encouraging homemade sugary drinks, which are even harder to regulate.”

Consumer advocacy groups: The Consumer Rights Foundation (CRF) expressed concern that lifting the 18‑percent slab could lower prices but also urged that a separate “health‑tax” be introduced for ultra‑processed drinks. “Taxation should be a tool for public health,” CRF spokesperson Arjun Patel wrote.

Large beverage firms: A confidential internal memo from Coca‑Cola India (released by an industry insider) suggested that the company would welcome the change, but also hinted at a “strategic plan to shift to healthier product lines” that could be more profitable if the tax burden were removed.

6. Broader Economic Context

India’s overall GST revenue reached ₹8.4 trn in FY24, a 15 % increase from the previous year. The government has said it is exploring ways to raise revenue without overburdening the middle class. Removing sin‑tax from high‑volume items could boost domestic consumption and thus tax revenue in the long term, according to some economists. Others argue that a sin‑tax on sugary drinks could generate targeted funds for public‑health initiatives, such as anti‑obesity campaigns and nutrition education.

7. Potential Implications

If the 18‑percent slab is lifted, the industry anticipates a cascade of changes:

• Price reduction: Retail prices could drop by 5–7 %, making packaged drinks more affordable.
• Revenue loss for the government: Short‑term revenue could dip by up to ₹30 billion annually, though this could be offset by increased sales volumes.
• Industry restructuring: Manufacturers might re‑allocate capital to product innovation, health‑friendly formulations, and marketing, potentially boosting employment in R&D and packaging sectors.
• Consumer behavior: Lower prices may encourage higher consumption, which could raise public‑health concerns unless complemented by regulatory measures such as advertising restrictions or nutritional labelling.

8. Looking Ahead

The GST Council’s next meeting is scheduled for 14 May 2024, where it is expected to address a host of tax issues, including the sin‑tax on beverages. The industry’s petition has already stirred debate in Parliament, with the Minister of Finance promising a “fair and transparent review” of the tax structure.

While the BAI’s appeal is grounded in the argument of economic fairness and mass consumption, its success will depend on a confluence of political will, fiscal realities, and public‑health priorities. The outcome will likely shape the future of India’s packaged‑beverage market, as well as the broader dialogue on how sin‑taxes should be applied in a rapidly evolving consumer landscape.