Coca-Cola India says may have to shut factories if new sin tax passed

New Delhi, December 11

The Indian subsidiary of Coca-Cola Co said today it may have to close some bottling plants if the government pushes through a proposal that would subject fizzy drinks to a 40 per cent ‘sin’ tax, as part of a broader fiscal overhaul.

The beverage maker, which operates 57 factories and bottling plants across India, said a proposal to group sugary sodas with higher-taxed luxury cars and tobacco would hurt demand for its drinks.

“It will lead to a sharp decline in consumer purchase,” Coca-Cola India said. “In these circumstances, we will have no option but to consider closing certain factories.”

India’s ruling party is trying to push a goods and services tax (GST) through parliament that would replace a myriad of state sales taxes and shake up government revenue.

A government-appointed panel examining GST has suggested a standard rate of 17 per cent to 18 per cent, and 40 per cent on some goods including the carbonated drinks Coca-Cola sells. Its rival PepsiCo didn’t respond to a request for comment.

Several countries are debating so-called ‘sugar taxes’ to tackle obesity and encourage healthier lifestyles. While more than a fifth of India’s population lives below the official poverty line, the country is home to the third-highest population of obese people after the United States and China.

The company, which re-entered India after economic liberalisation in the early 1990s, has at times had a tricky relationship with local authorities. Last year it was forced to halt production at one of its bottling plants after it was accused of using excessive groundwater.