Coke, Pepsi unhappy at being clubbed with tobacco for ‘sin tax’

Makers of carbonated beverages are sparing no effort to battle a 40 per cent goods and services tax proposed by chief economic advisor Arvind Subramanian. They have said imposing the tax would hurt the Rs15,000-crore industry badly.

"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. In these circumstances, we will have no option but to consider shutting down certain factories," Coca-Cola India, which has 57 plants and factories across the country, said in a statement on Friday.

Coke's main rival in India and globally, PepsiCo, is also not happy. The company's chairperson and chief executive officer Indra Nooyi met Prime Minister Narendra Modi on Thursday, though it was not clear whether she brought up this issue.

PepsiCo and Coca-Cola had proposed Rs61,000-63,000 crore investments about three years ago to set up new plants in India, increase bottling lines, and improve back-end infrastructure and marketing. These investments would run up to the year 2020, the firms said.

"The demerit or sin tax of 40 per cent is not in line with the 'Make in India' programme launched by the government, which recognises food processing as an important sector," Coca-Cola said.

Carbonated beverage makers are upset at being clubbed with makers of paan masala, tobacco and tobacco products, which, according to the Arvind Subramanian panel on the GST, should be taxed at 40 per cent.

Spokespersons at PepsiCo were not available for comments. The two cola makers are expected to lobby through the Indian Beverage Association, which is expected to make presentations to the government against the recommendations soon.