The Indian Beverage Association (IBA) which represents leading soft drink companies has asked the finance ministry to introduce a tax system that depends on the sugar content in drinks. This demand comes before the GST Council meeting next month, where the tax rates for many goods will be reviewed.
Present High Tax Rates
At present, all aerated drinks including fruit based, low sugar, and no sugar varieties are taxed the same way. They are charged 28% GST plus 12% compensation cess, making the total tax 40%. This puts them in the same category as tobacco and pan masala, which are considered harmful “sin goods.”
IBA’s Secretary General, Dr. D.S. Gangwar, said this is unfair because healthier drinks are being taxed the same as harmful ones. He explained that low and no sugar variants, along with fruit based drinks, should not be treated as demerit goods like tobacco.
Growing Demand for Healthier Options
More Indians are now preferring low or no sugar beverages. For the first time, PepsiCo India’s partner Varun Beverages reported that more than half (55%) of its sales in the first half of 2025 came from low or no sugar drinks. In 2024, sales of such beverages doubled, reaching about ₹700–750 crore. This segment now makes up over 10% of India’s total beverage industry.
Global Companies Expanding Choices
Big international companies are also offering more healthy drink options. PepsiCo sells Pepsi Black, no sugar 7Up, and Gatorade Zero. Coca-Cola provides Sprite Zero, Diet Coke, Coke Zero, and Thums Up X Force. It also sells low-calorie functional drinks such as BodyArmor Lyte, Honest Tea, and Charged.
Call for a Healthier Tax Model
The IBA suggested that India should follow international examples where taxes are linked to sugar levels. Such a model would promote healthier consumption and also support companies that are creating better, low sugar options for consumers.
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