Facing heat from GST officials for evading taxes on the pretext of adding fruit juice or pulp to their carbonated beverages, local soft drink companies are set to shift to the 40% levy, said people familiar with the development.
While sugary carbonated beverages such as Coke, Pepsi and Sprite attract 40% tax, including cess on sin goods, similar drinks based on fruit pulp or juice fall in the 12% tax bracket. In 2014, PM Narendra Modi had urged foreign beverage giants to add fruit in fizzy drinks in a bid to boost sourcing from Indian farmers. The announcement resulted in both multinational and local companies launching fruit-based fizzy drinks that attracted lower GST.
“Regional beverage associations in Punjab, Haryana, NCR, UP and Rajasthan have finalised plans to shift to the 40% levy,” said a person with direct knowledge of the matter.
“There have been numerous raids on these companies and the penalty for evading GST is huge. They cannot risk it anymore as the pandemic has crippled business.” TOI was the first to report in August that regional beverage companies are under the GST scanner for paying lower tax despite not adding fruit juice.
“Adding fruit juice to fizzy drinks is not easy as it requires high capital expenditure,” said Akhil Gupta, the proprietor of a medium-sized North India-based beverage company, Fresca. “Moving to a higher rate of GST may result in price hikes,” he added.
The increase in maximum retail price could augur well for large players such as Coke and PepsiCo in the Rs 14,000-crore domestic soft drinks industry.
Source: timesofindia.com
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