Indian Beverage Association urges sugar-based taxation
Beverage makers push for tax system that differentiates drinks by sugar content as low-sugar demand gains momentum.
INDIA – The Indian Beverage Association (IBA), representing leading soft drink companies, has called on the finance ministry to adopt a sugar-based taxation system in line with international models.
The appeal comes ahead of a crucial Goods and Services Tax (GST) Council meeting scheduled for early next month, where tax slabs for consumer goods will be reviewed.
Currently, all aerated beverages—including no-sugar, low-sugar, and fruit-based drinks—are taxed at 28% GST plus an additional 12% compensation cess, bringing the effective tax rate to 40%. This places the category in the same bracket as tobacco and pan masala, classified as “sin goods.”
In a letter to the ministry, IBA Secretary General Dr. D.S. Gangwar argued that the existing framework “ignores low- and no-sugar variants and fruit-based beverages, which offer healthier alternatives.”
He stressed that aerated drinks are “mis-classified” as demerit goods, equating them unfairly with products associated with severe public health risks.
Industry data shows a significant rise in consumer preference for healthier options. PepsiCo India’s bottling partner Varun Beverages reported that, for the first time, over half (55%) of its sales between January and June 2025 came from no- or low-sugar variants.
Sales of such beverages doubled in 2024, reaching Rs 700–750 crore, according to market estimates. This segment now contributes more than 10% of India’s overall beverage industry.
Global beverage companies are expanding their low- and no-sugar offerings in response to changing consumer preferences.
PepsiCo markets Pepsi Black, no-sugar 7Up, and Gatorade Zero, while Coca-Cola’s portfolio includes Thums Up X Force, Sprite Zero, Diet Coke, and Coke Zero.
Additionally, Coca-Cola offers functional, low-calorie beverages such as BodyArmor Lyte, Charged, and Honest Tea.
The IBA emphasized that a taxation model linked to sugar content, as practiced in many advanced economies, would encourage healthier consumption while supporting the beverage industry’s innovation efforts.
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