Key Development 

The Indian Beverage Association (IBA), representing leading soft drink makers, urged the finance ministry to adopt a sugar-based tax system for beverages. The association made this demand ahead of the GST Council meeting next month, where members will review tax rates on several goods.

Current High Tax Rates

The government taxes all aerated drinks — including fruit-based, low-sugar, and no-sugar variants — at the same rate: 28% GST plus 12% compensation cess. This 40% tax places beverages in the same bracket as tobacco and pan masala, which regulators classify as harmful “sin goods.” IBA’s Secretary General, Dr. D.S. Gangwar, criticised this approach. He said the government treats healthier beverages unfairly by taxing them like harmful products. He argued that low and no-sugar drinks, along with fruit-based options, do not belong in the same category as tobacco.

Rising Demand for Healthier Options

Indian consumers increasingly choose healthier beverages. PepsiCo India’s partner, Varun Beverages, reported that low and no-sugar variants contributed over 55% of its sales in the first half of 2025. In 2024, the company doubled its sales of healthier drinks, reaching ₹700–750 crore. This segment now contributes more than 10% of India’s beverage industry. Global beverage companies continue to add healthier options. PepsiCo sells Pepsi Black, no sugar 7Up, and Gatorade Zero, while Coca-Cola offers Sprite Zero, Diet Coke, Coke Zero, and Thums Up X Force. The company also markets low-calorie functional drinks like BodyArmor Lyte, Honest Tea, and Charged.

IBA Calls for Sugar-Based Tax Model

The IBA urged India to follow global examples and link beverage taxes to sugar levels. The association stressed that such a system would promote healthier consumption and reward companies that invest in low and no-sugar innovations for Indian consumers.

Source: Foodtech News