Asking the government to take a long term view of the revenue potential of aerated soft drink industry which has attracted foreign direct investment of over $1 billion, leading industry chambers have sought removal of the 16 per cent special excise duty (SED) levied on drinks.
"It is a misconception that aerated waters are a luxury item. Over 90 per cent of the consumption is by lower middle and middle income groups. It is therefore suggested that SED on aerated soft drinks be removed and this industry be brought at par with other food beverages," trade associations and industry bodies CII, FICCI, ASSOCHAM and PHDCCI have said in their pre-budget memorandums.
The chambers said the aerated drinks industry was at a nascent stage in the country with per capita consumption lower than other countries including Pakistan, Sri Lanka, Thailand and Indonesia.
"Industry needs the support of the government through rationalisation of duty structure to enable it to grow to its potential," the chambers said.
The growth in the industry will result in increased revenue to the central and state governments and create jobs, it said, adding that the industry was currently employing over 1.5 lakh people directly and indirectly.
"Growth in the past has come essentially through expensive promotions and huge investments and sales generating assets," CII said, adding the "sector's growth is dependent on a facilitating excise regime which would drive down prices."
High excise duty has also led to rise in the incidence of spurious aerated soft drinks, chambers said.
Relief in SED in one go will help in stimulating volume growth, the chambers added.
Aerated soft drinks were currently subjected to excise duty of 32 per cent comprising basic duty of 16 per cent and special excise duty of 16 per cent.