The Indian subsidiary of Coca-Cola Co could be closing some of its bottling plants in the near future, in the wake of a recent government proposal that would make fizzy drinks the subject to a 40 percent “sin” tax, as a part of a broader fiscal overhaul, says Reuters.
Currently, Coca-Cola has 57 factories and bottling plants in India and, if the proposal passes, it would definitely affect the demand for drinks India, alongside luxury cars and tobacco.
Coca-Cola could register important losses
“It will lead to a sharp decline in consumer purchase. In these circumstances, we will have no option but to consider shutting down certain factories,” the company said in an official statement.
The proposal is a result of the Indian Government party’s attempt to push a national goods and services tax, in order to replace some state sales taxes, alongside shaking up government revenue. A panel examining the tax suggested a standard rate of 17-18 percent, but carbonated drinks, including Coca-Cola, are in another category, hence the 40 percent tax.
India is not the only country which is debating this type of tax, as several of them are currently debating the so-called “sugar taxes”, in order to reduce obesity and promote a healthy lifestyle.
Still, the fact that India will also apply this law shouldn’t come as a surprise, since it has the third-highest population of obese people, after the U.S and China. In contrast, more than a fifth of the country’s population lives below the official poverty line.
Will the investments be delayed if the proposal is approved?
Previously, Coca-Cola India announced that it’s planning to invest over $5 billion until 2020, in order to raise production and target the growing middle class. Currently, the company has 25,000 employees in India.
Finally, PepsiCo Inc India declined to comment anything related to this situation.
