Beverage-maker Coca-Cola said on Friday it may be forced to shut some of its bottling plants in India if the government accepts the 40% tax on aerated drinks proposed by the committee on the goods and services tax (GST) headed by Chief Economic Advisor Arvind Subramanian.
Currently, the aerated drink makers pay an excise duty of 18%.
"We run 56 factories across India. If the proposal comes into effect, we will have to shut factories in India," Venkatesh Kini, president, Coca-Cola India and South West Asia, told HT.
"Any step in this direction will lead to several challenges for our business and do a lot of damage to us, our 30 lakh retailers, thousands of distributors and bottlers. Because this is GST, it will have a ripple effect and hurt the entire ecosystem," he said.
The GST bill, if passed by the Parliament, will replace a number of state sales taxes. The Narendra Modi government is facing strong opposition in the Rajya Sabha to pass the bill.
Coca-Cola has also said the per-capita consumption of aerated drinks in India is very low compared to other nations and the proposed "punitive tax rate" will severely affect the prospects of the Rs 14,000-crore soft drink industry.
"We followed the government's decision to increase taxes last year, which forced us to pass the tax increase to consumers. The price of a soft drink bottle increased from Rs 10 to Rs 12. The immediate impact was a (double-digit) decline in demand. Hence, the proposal to apply a 40% tax is unthinkable," Kini said.
Debates on "sugar taxes" aimed at dealing with obesity problems and promoting healthier lifestyles are going on in several countries, Reuters reported.
India is home to the third-highest population of obese people after the US and China, despite a fifth of its population living below the official poverty line, according to medical journal The Lancet.