Beverages Industry seeks for Rationalisation of GST

The Retailers Association of India (RAI) and the PHD Chamber of Commerce and Industry (PHDCCI), two trade associations, have pushed the GST Council to rationalise the tax on non-alcoholic beverages. The industry is calling for exemptions for bottled drinking water and reduced GST on agri-based beverages.

The industry associations stated that the non-alcoholic beverage sector in India has “one of the highest tax rates globally” and that the majority of the products in this category are subject to high GST tax slabs ranging from 12% to 28%.

Industry associations have informed several authorities that packaged drinking water, considered a basic good, is liable to 18% GST (twenty percent for packets containing less than twenty litres, and twelve percent for those containing more than twenty litres). The groups have advocated for packaged drinking water to be exempt from GST and placed in the same GST slab as other necessities.

Water should be made available to the general people at the most reasonable cost because water is a necessary good. As per the Retailers Association of India’s position, the high 18% GST rate makes water a luxury item and makes the GST charge equivalent to other non-alcoholic beverages.

In order to increase demand for the category, these industry associations have also encouraged the council to cut GST from the present rate of 12 percent to 5 percent, which would encourage the agri-based beverage segment (fruit juices). This will be in line with the five percent GST rate on other categories of processed foods derived from agriculture, including as edible seeds, pre-packaged grains, frozen vegetables, dairy products, frozen fats and oils, and processed spices, according to the PHDCCI’s representation.

Meanwhile, these business associations have argued in favour of reducing the GST on non-agricultural beverages with minimal sugar content. Industry participants have proposed that the existing 28% GST rate should be reduced to 12% for diet carbonated and non-carbonated beverages with no added sugar. They went on to say that non-agribased drinks with less than 6% sugar need to be subject to an 18% levy.

“Rationalisation of GST rates for non-alcoholic beverages will draw significant investments to expand domestic food processing industry capacity and will result in numerous advantages throughout the value chain, including competitive pricing for end consumers,” the industry associations declared.