Caffeinated Drinks Rates Hiked To 28%+12%: GST Council

In its recent meeting, the GST council, chaired by Ms Nirmala Sitharaman, Union finance minister, in a recent meeting decided that the tax rates on energy and caffeinated beverages will now be hiked to 28% with an additional cess of 12% as against the current rate of 18%. With this decision the effective tax on these drinks would now be 40%.

In its recent meeting, the GST council, chaired by Ms Nirmala Sitharaman, Union finance minister, in a recent meeting decided that the tax rates on energy and caffeinated beverages will now be hiked to 28% with an additional cess of 12% as against the current rate of 18%. With this decision the effective tax on these drinks would now be 40%.

Reacting to the development, Dr Tahir Sufi, professor & deputy director, hospitality division, Amity University Noida, said, “The GST rate applicable on caffeinated drinks appears to bringing them at par with carbonated drinks, from the current rate of 18 to 28%. However, along with the hike in cess the effective rate would be 40%.”

He added, “This is a sin tax and assumption of the government is that the hike shall discourage the sale of such drinks. Such decisions shall have a direct impact on the prices of caffeinated drinks of brands like Red Bull, Monster and Sting. The prices will witness a sharp increase.”

He pointed out, “It is expected that such sharp price rises in such drinks shall lead to a decrease in their consumption if we look at research studies conducted on the impact of tax rise on tobacco products in India and caffeinated drinks in USA. It is an important decision taken by government which can have a positive impact on the health of youth who are the largest consumers of such drinks.”

Offering the industry point of view, Dr Bindu Maurya of AFST(I), stated that GST hike on caffeinated beverages from 18% to 28% plus increase in cess is not a very welcome decision for the beverage manufacturers and this will have direct impact on consumer market. This will also impact food sector to a large extent.

Echoing these views, Gurbaxish Singh Kohli, VP, FHRAI & president, HRAWI, said that the impact of GST on caffeinated beverages to be hiked to 28% plus additional cess of 12% will be very much on the industry. India has huge plantations of tea and coffee and we are the biggest consumers and also export them. If caffeinated beverage are considered to be unhealthy, so is smoking which is very much unhealthy for health rather than caffeine. The consumption of caffeine will go down and the industry will face a huge problem because of the same. In hotels and coffee shops, the rate of caffeinated beverages will go up and the consumption will go down as not all the people will be able to afford it.”

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