Coca-Cola India Might Shut Factories If Tax Goes Through

The Coca-Cola subsidiary in India said Friday that it might have to shut some of its bottling plants if the India government pushes a proposal through that would subject carbonated drinks to a sin tax of 40% as part of wide ranging fiscal overhaul.

The beverage maker operates 57 bottling plants and factories in India. It said that the proposal of grouping the sugary sodas with the higher taxed tobacco and luxury cars would hurt its demand for the drinks.

The India subsidiary of Coca Cola said in a prepared statement that a tax of 40% would lead to a sharp drop in consumer purchases and under that circumstance, no other option would be available other than shutting down some factories.

The ruling party in India is attempting a national goods and service tax or GST through the parliament that would take the place of an array of state sales taxes and shakeup the revenue of the government.

A panel that was government appointed that has examined the GST suggested a standard 17% to 18% rate and a higher 40% tax rate on some goods that included carbonated drinks such as the ones that Coca Cola makes.

Several countries have been debating the sugar taxes to fight obesity and to encouraged lifestyles that are healthier.

While more than one fifth of the population in India is below the poverty line, the country has the third highest obese population following the U.S. and China.

The chairman of PepsiCo in India said that while he was in support of the GST, the 40% rate was too high.

Coca-Cola India, which has over 25,000 employees, said it is planning to invest more than $ 5 billion before 2020, as it wants to increase production to target a middle class that is expanding.

The company returned to India after the economic liberalization of the country during the 1990s.

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