Soft drink giant Coca-Cola India has said that it will be forced to shut down some factories if the government accepts the proposal to impose a 40-per cent 'sin tax' on aerated beverages.
Coca-Cola India is the first company to protest the high tax rate proposed in the good and services tax (GST) Bill. Currently, the tax on aerated beverages such as Coke and Pepsi Cola, which have come under severe criticism from health groups due to their high sugar content, is 18 per cent. The companies have also been facing rough weather in the West over health issues."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 ... It will lead to a sharp decline in consumer purchase and for a demand-driven industry, it will mean a significant rationalisation of manufacturing capacity," Coca-Cola India and South West Asia vice-president (public affairs & communication) Ishteyaque Amjad said in a statement.
At the same time, Coca-Cola reiterating that India is one of its most important markets said, "The Coca-Cola Company believes in India and identifies it as one of its strategic growth markets. The Coca-Cola system in India has already invested more than $2.5 billion ... Our system is on course to invest another $5 billion in India by the end of 2020."
Coke's rival PepsiCo said that though the tax rate of 40 per cent is high, it is confident that the government will take a balanced view. "We are supportive of GST ... However, a tax rate of 40 per cent is high. Having said that, we are confident that the government will take a balanced view of taxation with respect to our industry," PepsiCo India chairman and chief executive officer Shiv Shivakumar said.