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PRESS: India Applies Sin Tax on Sweetened Carbonated Beverages

40% Tax on Colas to Discourage Consumption and Protect Health

 
For Immediate Release
August 17, 2017

New Delhi: The Indian government has introduced sin taxes on sweetened carbonated beverages (SCBs) such as Coca-Cola and Pepsi because of the negative health impacts of products with high sugar content.

The sin tax was brought into force on July 1, 2017, and makes India one of the first countries in the world to implement a nationwide sin tax on sweetened carbonated beverages.

Soft drinks in India are now listed alongside more established harmful products such as tobacco.

"Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured" have been placed under the highest tax bracket in the newly introduced Goods and Services Tax (GST) regime in India, at 28%.

In addition, these products will attract 12% "compensation cess", or sin tax, a category reserved primarily for harmful products such as tobacco.

The move by the Indian government to tax SCBs at 40% is significant because SCB consumption rates are still very low in India, and such a tax has the potential to discourage consumption and prevent adverse public health impacts as a result of high sugar consumption.

The proposal to sin tax SCBs was supported by an international group of public health experts last year and is also aligned with recommendations made by the World Health Organization in 2016 to tackle obesity and diabetes.

Sin Taxes Work, Gaining Popularity

Mexico introduced a sin tax on sugar sweetened beverages (SSBs) in January 2014, and a recent study concluded that SSB sales dropped 5.5% in the first year, and by 9.7% the second year, for an average drop of 7.6% in two years.

The city of Berkeley, which became the first city in the US to adopt sin taxes on SSBs in January 2015, also saw a significant drop in sales in the first year, nearly 9.6% (in ounces per transaction).

It is now widely acknowledged that SSBs pose a unique risk of increasing the risk of obesity, type 2 diabetes and cardiovascular disease, and applying sin tax on these products is gaining momentum rapidly around the world.

In the last year, SSB taxation has been announced in the cities of San Francisco, Oakland, Albany, Boulder, Philadelphia and Cook County, which includes Chicago, in the US. South Africa, Philippines and the UK have also announced plans to tax SSBs in the near future.

The rollout of the sin tax on SCBs in India is still in its initial stages and is part of a major tax reform, the Goods and Services Tax (GST). The marketplace is yet to see the full implementation of the sin tax on SCBs.

However, there are limits to realizing the full potential from sin tax on SCBs in India. Public health experts have recommended that revenue derived from SCB tax be used for public health interventions and public education on nutrition. Currently, the cess portion of the tax (12%) will go to the states, and the remaining 28% will be divided between the state and the central government, and all these revenues will go to the general fund.

"I am very encouraged that India is taking a proactive and preventative stance at this time when diabetes is rising in much of the country. Allocating the funds from this tax to public health programs would amplify the positive impact of this program on India's health and welfare," said Dr. Sanjay Basu, Assistant Professor of Medicine at Stanford University.

The sin tax on SCBs do not include fruit juices and SCB manufacturers often project fruit juices as healthy products. However, some fruit juices contain even more added sugars than are found in sweetened carbonated beverages, and they also lack the beneficial fiber that is found in fruits making them as harmful as sweetened carbonated beverages.

Campaigners and public health professionals have welcomed the sin tax of SCBs in India and plan to continue advocating to ensure other products high in fat, sugar and salt - junk food - should be sin taxed in order to curb consumption.

Welcoming the sin tax, Amit Srivastava of the India Resource Center said, "Clubbing soft drinks like Coca-Cola alongside tobacco products by the Indian government is a welcome move, and like tobacco, India should introduce other regulations to restrict access to soft drinks such as curbs on marketing and endorsement by celebrities. With over 70 million people with diabetes in India, the country can ill afford to promote unhealthy products such as soft drinks and junk food."

For more information, visit www.IndiaResource.org

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