Tax-evasive Indian soft drink companies forced to shift to 40% rate

Some soft drink companies in India will shift to the 40 percent tax rate after being found unqualified for the 12 percent tax bracket reserved for fruit pulp or juice.

In August, regional beverage companies were placed under scrutiny for paying lower taxes despite not adding fruit juice to their beverages.

Consequently, raids were conducted on these companies.

With the pandemic crippling their business, the beverage companies decided to avoid substantial penalties for evading GST.

Foreign beverage giants were urged way back in 2014 to add fruit in fizzy drinks to boost sourcing from Indian farmers. The announcement resulted in both multinational and local beverage firms launching fruit-based fizzy drinks subject to lower GST.

But adding fruit juice to fizzy drinks requires high capital expenditure, which may not be within the budget of smaller soft drinks manufacturers.

The retail price increase could augur well for large players such as Coke and PepsiCo in India's $1.9 billion soft drinks industry.