Beverages are overtaxed: Relief would result in economic gains

Let's ease their tax burden to push informal players back and boost legitimate business prospects

- ARUNA SHARMA

India's taxation framework for non-alcoholic beverages stands out as one of the most onerous in the world. With the introduction of the goods and services tax (GST) in 2017, the central government intended to simplify multiple indirect taxes and foster a uniform market. Yet, when it comes to beverages—particularly carbonated drinks—the policy has resulted in a tax burden that not only diverges significantly from international norms, but also hampers the ease of doing business.

Under the GST regime, beverages like aerated drinks (taxed at a rate as high as 40% before GST) were assigned a standard rate of 28%. To address potential revenue losses for states, the Subramanian Committee recommended an additional 12% compensation cess, pushing the effective tax rate on these products to 40%. Recently, to harmonize the tax treatment of similar products, the GST Council decided to raise the rate on caffeinated beverages from 18% to 28%—again, with an additional compensation cess of 12%. These decisions have cemented India's position as one of the highest-taxing nations for sugar-sweetened beverages.