GST on Cold Drinks: Tax Rates, HSN Code and Impacts

Being a tropical country, the majority of Indian states experience long and scorching summer heat. It makes cold or cold-served drinks a staple beverage among Indians. However, classification of cold beverages varies widely based on applicable GST rates. 

This article discusses different rates of GST on cold drinks and their implication on beverage categories. 

GST Rates on Cold Drinks

Many non-alcoholic, carbonated cold drinks attract GST at the highest rate of 28%, along with a 12% compensation cess since 2021. Although cold drinks may be considered a uniform category of beverages that people prefer to consume chilled during summer, they are not treated as a single category for indirect taxation purposes. Unlike these beverages, alcoholic drinks are not subject to GST; instead, VAT is applied on their sale.

The reason behind GST at the highest rate on sugary, fruit-based or non-fruit-based fizzy (carbonated) drinks is the status of these beverages as ‘sin’ or ‘demerit’ goods. The government considers that excessive consumption of such drinks may have negative health implications.

However, not every type of non-alcoholic cold beverage attracts GST at the highest rate. The GST authority classified non-alcoholic beverages into multiple tax categories with their respective HSN codes to eliminate confusion. Consumers can check HSN codes in their GST tax bills to verify correct tax rates.

Product Classification and HSN Codes

The GST Council segregates cold-served beverages into the following categories for determination of applicable GST rates. 

Impact of GST on Different Types of Cold Drinks

Per capita consumption of non-alcoholic cold-served beverages and bottled water in India is increasing rapidly. However, compared to developed economies, the level of consumption is much lower. The maximum growth is in aerated sweetened and flavoured water, as well as packaged aerated beverages. The current multi-structured GST tax rates on cold drinks often cause confusion among consumers. Besides, it increases prices for bottled cola-based and fruit pulp-based aerated drinks. It may limit the industry’s growth.