According to the report, India imposes one of the highest tax rates on sugar-sweetened beverages (SSBs), with a total tax rate of 40% as of 2023. This figure is significantly higher than that of over 90% of the countries that tax SSBs, based on comparative data compiled by the World Bank. The report also added that global and domestic consumers are increasingly opting for low-sugar and zero-sugar varieties.
Manufacturers around the world are reformulating their products to cater to health-conscious consumers, offering options like low-sugar, fruit-flavored, and zero-calorie drinks. In India, however, companies face an uphill battle. The high tax of 40%, irrespective of sugar content, is preventing firms from innovating and scaling their low-sugar or fruit-based CSD offerings.
The report also highlighted that India, a leading global producer of fruits like mangoes and bananas, has untapped potential for incorporating these ingredients into the CSD sector. Yet, the country’s CSD industry lags behind other developing nations, such as Thailand and the Philippines, in terms of product variety and revenue generation. Despite generating $18.25 billion in revenue in 2022 and growing at a compound annual growth rate (CAGR) of 19.8% from 2017 to 2022, the sector remains underdeveloped.
The report also underscored that India’s CSD market could be a major driver for investment and job creation, particularly in Tier 2 and 3 cities. However, the high tax rates, seen as a lucrative source of revenue for the government, are acting as a deterrent to the sector’s growth, preventing it from becoming a global competitor and unlocking its full economic potential.
(With PTI inputs)