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Energy and caffeinated drinks are set to get costlier, with the GST Council’s move to increase the rate on these drinks to 28 per cent from the current 18 per cent tax slab.
In addition, these beverages will attract a cess of 12 per cent taking the effective tax rate to 40 per cent.
Experts said this move by the GST Council was taken to remove the anomaly of caffeinated beverages being taxed lower than carbonated drinks.
Abhishek Jain, tax partner at EY India said, this move will bring parity in the tax rate of caffeinated beverages and aerated soft drinks.
The caffeinated energy drinks market is currently estimated at over ₹1,000 crore. Industry sources said that already the majority of the products are priced in the premium price range of ₹95-100 and the tax hike will push the prices further up for consumers. Brands such as Hungary-based Hell Energy, which are priced cheaper have forayed into the country recently.
The caffeinated energy drink segment includes key players such as Red Bull, Monster and Sting.
Talking about the impact on the energy drinks industry, a senior executive with an energy drink brand said, “This will considerably increase the tax incidence on energy drink companies. Companies will need to hike the prices and pass them on to consumers. However, with the festival season around the corner it will depend whether such a price hike can be taken immediately.”
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