Coca-Cola says it will shut its factories in India if the government accepted the 40% tax on aerated drinks proposed by the committee on goods and services tax headed by chief economic adviser Arvind Subramanian.
“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.”
The Rs14,000-crore soft drink industry currently attracts an excise duty of 18%.
Coca-Cola and PepsiCo are the major players in the market.
The company also said India’s per capita consumption for aerated drinks is among the lowest in the world and such a punitive tax rate will adversely impact the 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 10 to 12. The immediate impact was a (double-digit) decline in demand. Hence, the proposal to apply a 40% tax is unthinkable.”
But India still counts among Coca-Cola’s most important markets. “There is a lot of interest to pour investments here considering the Make in India campaign. We have invested over Rs 1,000 crore in three green field projects in the last one year. However, slow growth in demand is our primary concern,” Kini said.