Indian Beverage Association sore on excise duty hike on aerated drinks

The Indian Beverage Association (IBA), an association of leading Indian companies with direct and allied interests in the non-alcoholic beverage industry was taken aback at the Centre’s 2014-15 budget move to hike the excise duty on aerated drinks with added sugar by 5%. In a statement issued after the budget was announced on July 10, 2014 at New Delhi, IBA’s Secretary General, Arvind Varma said, “We are extremely shocked by the retrograde budget proposal of a five per cent hike in excise duty on aerated drinks with added sugar.”

“The soft drinks industry is already one of the highest-taxed categories in the country. The combined impact of Central value-added tax (CENVAT) and state VAT rates reaches 34% in eight states in the country. Coming on top of the current 12% rate, the additional 5% duty increase would be tantamount to a 40% increase in the central excise duty which would hit the industry hard, and cause a major slowdown at a time when demand growth for the industry has been sluggish,” Varma stated.

“The carbonated soft drinks industry is a key segment of the food processing sector in India. It is a significant user of agri products and, with its high labour intensity, contributes significantly to agricultural growth and employment. With a ratio of direct to indirect employment of 1:4, similar to that of the software industry, the industry’s developmental impact is not adequately appreciated. Currently, the industry employs over 3,00,000 people, and if there is a conducive environment for growth the industry has the potential to grow at double-digit rates, and can contribute more than a million additional jobs over the next decade,” he pointed out.

It must also be understood that in a country where options of safe, convenient and hygienic beverages are rather limited, carbonated soft drinks play a very important role in meeting the hydration needs of people. With this hike in excise duty, the industry will have no option but to increase the price of its products. An increase in price will also fuel the growth of beverage options from the spurious and unorganised sector which, on the one hand, poses significant risk to public health, and on the other, will take away tax revenue from the government.

IBA, in its statement, has urged the government to reverse this hike, as it will retard the progress of an industry which could have a significant positive impact on India’s development, particularly in the changed governance scenario in the country.

The Association will serve as an inter-face between the industry, the government and the public, besides providing a unified and focused viewpoint in respect of legislative and regulatory matters. It will also serve as a platform to share and exchange knowledge and information on industry best practices related to non-alcoholic beverage Industry.