Soft drinks have once again come in news because of the implementation of the goods and service tax on such drinks. They have always had a complicated tax structure as the service tax in india guidelines do not have proper distinctions. Payment of service tax is integral for any business to run and based on the laws of service tax Drinks are taxed based on their composition of fruit flavours. The latest GST updates have not only impacted the businesses but will also bring about transparency in the composition of a drink.

What is the GST for aerated drinks?

Aerated drinks in India constitute a huge section of the market. The taxation on Aerated drinks in India has been defined based on the composition of the flavouring in these drinks. According to the law if a drink has more than 10% (5% for lemon) then it is taxed at 12% as a beverage. If the drink happens to have less than 5% then it is taxed as flavoured water at 28% GST plus compensation cess @12%.

This brings in the ambiguity as to what happens with drinks between the 5% and 10% range.

How does change in GST policies Impact the Aerated Drinks industry?

There is a loophole that is often taken advantage of by the makers of aerated drinks to drive in more income. In the market for Aerated drinks, the Goods and Service Tax structure has a clear distinction in taxation for drinks with More than 10% flavour and less than 5% flavour. There is no clear denomination of drinks that fall in between these two slabs. The latest GST increase in India for aerated drinks has brought about a change in the sale of the drinks. 

Companies have brought out new products which promise more flavour than before. With the latest updates in the Service tax, it has become mandatory for the sellers to have a certain amount of flavour in the drink to qualify as a beverage. There were many companies who were giving less flavour in order to decrease the cost and bring in more revenue. The recent update will bring back things in order.

Conclusion

The aerated drinks market has been heavily impacted by the latest development in the GST structure. It will not only prompt the sellers to increase the quality of drinks but will also help consumers get better products. This was not possible as the sellers are shifting more towards the increase in revenue through a decrease in the quality of the drinks.