Reports are that the Group of Ministers (GoM) on GST rate rationalisation, led by Deputy Chief Minister of Bihar Samrat Chaudhary recommended a new slab of 35 percent for tobacco, tobacco products and aerated drinks.
These products are currently costing 28% GST. The GoM consider these products as ‘Sin Goods’.
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A sin tax is imposed on goods and services, which are perceived as harmful to society. Liquor, Tobacco Products, Gambling, etc come under this category.
There is also a compensation tax of 12% on aerated drinks. Taking the total tax to 40% and now this additional GST hike will take it to 47%.
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But why the Governments continue to allow the sale of these products is a different topic.
For now, the Government allows the products, makes them so costly, and mints revenue via high Tax Rates in the name of discouraging the use with insane costs.
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Once the GST Council passes these recommendations, the prices of these products will become dearer.
It is to be noted that aerated drinks popularly known as Cool Drinks are also considered ‘Sin Goods’ just like Cigarettes.
Various researches have proven that aerated drinks especially due to their high sugar content can cause a number of serious health problems including obesity, diabetes, body weight, heart problems, stomach disorders, cancers, liver damage, poor bone and teeth health, kidney failures, poor metabolism, and even infertility among women.
India, as we know, is the Obesity and Diabetes capital of the World.
While there is always an opinion that the Government is trying to fill its coffers in the name of Public Health, the real issue with the aerated drinks is their price.
These drinks are available as cheap as 20 Rupees for 200 ML and the 2.25 Liter bottle will at best cost 100-110 Rupees. Further, the Online Platforms and Supermarkets insanely discount them.
Also, probably there is no other item that is so much available to the end-users.
To understand how big is the industry, the Indian Carbonated Soft Drinks market had total revenues of $18.25 billion in 2022 with a total consumption of 9.29 billion liters.
Keeping aside the Tax loot, it has to be seen if this hike will be instrumental in decreasing the usage of these aerated drinks.
Meanwhile, the industry has started its demands to impose Tax based on the Sugar Content in their drinks instead of imposing a blanket Tax.
Sugar-layered tax approach has been adopted by many of the countries including the UK, France, Thailand. The Tax system helped in motivating the companies to reduce the sugar content in their drinks.
Obviously, the companies would like to come in a bracket where they pay less.
Already major brands brought ‘Zero’ or ‘Diet’ version of their Drinks. We will have to see if the GST Council will encourage the low-sugar or zero-sugar drinks.
If the real idea is public health and not revenue generation, we may see the Sugar-layered tax approach.
