Expectations for Home Care products and Shampoos that now attract 28 per cent GST, most FMCG products have been placed at 18 or below levels and this is on expected lines. However, FMCG firms are disappointed with the government’s decision to levy 12 per cent GST on Ayurvedic medicines and products, which they feel will be adverse for the Ayurvedic medicines category and that too at a time when the government has been talking about promoting traditional Indian alternative medicine. “We are still awaiting clarifications on excise exemptions, post which we will be able to calculate the full impact. Overall, the new rates are marginally favourable,” says Lalit Malik, chief financial officer at Dabur India Ltd.
The Indian Beverage Association (IBA), which is an industry body, where leading companies with direct and allied interests in the non-alcoholic beverage industry have come together to form their representative body. They include Dabur India Ltd, Red Bull India, Tetra Pak India, Pearl Drinks, Bengal Beverages, Jain Irrigation Systems, Coca-Cola India and Pepsico India Holdings.
In a statement, IBA has expressed disappointed with sweetened aerated water and flavoured water being placed in the highest tax slab rate of 28 per cent combined with an additional cess of 12 per cent. The effective tax rate of 40 per cent on these products under the GST regime is against the stated policy of maintaining parity with the existing weighted average tax which is significantly below 40 per cent. This increase will have a negative ripple effect and hurt the entire ecosystem of farmers, retailers, distributors and bottlers in India.
“The rationale for the GST regime is to bring about a taxation system that propels the India’s growth story forward and making products more affordable for consumers and benefit society at large. This increase in tax will further limit the growth of the beverage industry,” said the statement.
Moreover, the imposition of cess on non-aerated flavoured water and nutrition drinks is not in line with the stated intentions of levying cess only on aerated drinks, said IBA.
However, it expressed hope for reconsideration of the rate of cess on aerated drinks besides having a lower rate for non-sugar sweetened drinks, nutrition beverages and aerated beverages that contain fruit juice and expects a positive outcome from the Govt.
