The Indian subsidiary of beverages major Coca-Cola has warned that it may have to shut down some factories if the government pushes through the Good and Service Tax (GST) proposal that would subject fizzy drinks to a 40 per cent tax (sin tax).
The company has reacted over the proposal to tax aerated drinks at 40 per cent under the new GST regime.
Coca-Cola, which operates 57 factories across India, said a proposal to group sugary sodas with higher-taxed luxury cars and tobacco would hurt demand for its drinks.
“It will lead to a sharp decline in consumer purchase, and for a demand-driven industry, it will mean a significant rationalization of manufacturing capacity. In these circumstances, we will have no option but to consider shutting down certain factories,” Ishteyaque Amjad, Vice-President, Public Affairs and Communication said in a statement posted on the company’s website.
The constitutional amendment bill which is ease taxation system in the country and increase state’s revenue is stuck in the Rajya Sabha, having been passed in the Lok Sabha in May.
A government-appointed panel examining GST has suggested a standard rate of 17 per cent to 18 per cent, and a higher tax of 40 per cent on some goods including the carbonated drinks Coca-Cola sells.
Amjad said, "an acceptance of the Arvind Subramanian committee recommendations with regard to GST rate of 40 per cent on aerated beverages, will have a negative ripple effect on the entire beverage ecosystem, thereby affecting lakhs of retailers, thousands of distributors, transporters, cold drink equipment manufacturers, farmers and producers of raw materials for the beverage industry and the entire forward and backward supply chain systems".
Coca-Cola India, which employs 25,000 staff, said it is on course to invest $5 billion by 2020 in the country.
“This is not in line with the “Make in India” programme launched by the Govt. of India, which recognizes “Food Processing” as an important sector within the program and specifically mentions our industry under the category of “Consumer food: packaged food, aerated soft drinks, packaged drinking water and also Beverages: fruit-based and cereal-based,” Amjad said.
BW Reporters
The author is Senior Correspondent with BW Businessworld
