Coca-Cola warns of factory closures over GST plan

Coca-Cola, which operates 57 factories across India, said the proposals if accepted would hurt demand for its drinks, making business unviable.

This is not in line with the ‘Make in India’ programme of the Government.

Raising a red flag over the proposal to tax aerated drinks at 40 per cent under the new Goods and Services Tax regime, beverages major Coca-Cola warned that it may have to shut down some factories in India if the government pushes through the proposal.

Coca-Cola, which operates 57 factories across India, said the proposals if accepted would hurt demand for its drinks, making business unviable.

“It will lead to a sharp decline in consumer purchase, and for a demand-driven industry, it will mean a significant rationalization of manufacturing capacity. In these circumstances, we will have no option but to consider shutting down certain factories,” Ishteyaque Amjad, Vice-President, Public Affairs and Communication said in a statement posted on the company’s website.

The GST constitutional amendment bill is stuck in the Rajya Sabha, having been passed in the Lok Sabha in May. A government-appointed panel examining GST has recommended a rate of 40 per cent on goods such as luxury cars, aerated beverages and paan masala.

The proposal if implemented “…will have a negative ripple effect on the entire beverage ecosystem, thereby affecting lakhs of retailers, thousands of distributors, transporters, cold drink equipment manufacturers, farmers and producers of raw materials for the beverage industry and the entire forward and backward supply chain systems.

Coca-Cola India, which employs 25,000 staff, said it is on course to invest $5 billion by 2020 in the country.

“This is not in line with the “Make in India” programme launched by the Govt. of India, which recognizes “Food Processing” as an important sector within the program and specifically mentions our industry under the category of “Consumer food: packaged food, aerated soft drinks, packaged drinking water and also Beverages: fruit-based and cereal-based,” Mr. Amjad said.

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