Recently local soft drinks and beverages companies have been charged with higher GST rates in 2021. To stay intact and to maintain their monopoly in this cut-throat competition in beverage industries, the soft-drink sellers have come up with this new idea.
Local Soft drink sellers have cut down their standard packaging size from 200ml to 160 ml. It is done in order to save them from strikingly high GST rates.
In addition to this change, they have also lightened the quality of the PET pre-form from 11.5gm to 10gm in order to cut and save costs. It is estimated that these changes will probably save 15% of costs.
Higher GST rates on soft drinks have made it difficult for local and small business owners because of the heavy costs involved in the machinery for the manufacturing of beverages and soft drinks.
Big shot soft drinks sellers can easily sustain and cope with this steep rise in GST rates but it came as havoc for local shop owners.
The GST tax on carbonated drinks with food pulp has increased to 40% which includes a GST of 28% and the remaining cost percentage includes compensation cess. Earlier it was 12% for a drink containing fruit content greater than 10%.
The trend to make carbonated fruit drinks was started by the present Prime Minister Narendra Modi in 2014. He asked the soft drink makers to add 5% of natural fruit juice to the soft drinks which will eventually help the local farmers.
Because of sky-rocketing GST rates, local soft drink sellers are forced to cut down their package size. They are moving to smaller package sizes now. Despite doing all these, they are able to get only 1-2% of the margin. The high rates of the preform are because of the ongoing Ukraine-Russia war. To get more margin and to save costs, soft drink sellers have increased the package size now such as one-litre bottles. It gives the margin of 7-8% which is more than what they were getting when they have reduced the size.
In a nutshell, it can be concluded that Incredibly high GST rates on carbonated soft drinks have made it difficult for the small sellers to sustain in the market.