New GST rules impose a 40% tax on sugary drinks while cutting juice rates to 5%. Businesses must update HSN codes for compliance.
During India’s extensive summer seasons, a variety of cold drinks, including fruit-based options and carbonated sodas, are widely consumed. Despite their similar appearance in stores, their classification under the Goods and Services Tax (GST) system shows significant differences. The 56th GST Council meeting, held on September 22, 2025, introduced significant rate adjustments and eliminated the 12% compensation cess previously applied to carbonated beverages. These revisions aim to streamline the indirect tax framework and align tax rates with public health objectives and industry requirements.
Summary of Key Changes
Significant updates to GST rates for various beverages were introduced. Carbonated fruit drinks and carbonated beverages containing fruit juice now face a 40% GST, an increase from the previous 28% plus 12% cess, which has been removed and integrated into the new higher rate. Conversely, packaged drinking water, soy milk drinks, and non-carbonated fruit pulp or juice-based beverages have seen their GST rates decrease from 12% to 5%. Ready-to-drink plant-based milk beverages also now attract a 5% GST, down from 18%. All aerated drinks that include sugar or artificial flavoring are now subject to a consistent 40% GST.
Detailed GST Rates for Beverages
Previously, non-alcoholic carbonated drinks were subject to a 28% GST along with a 12% compensation cess, classifying them as “demerit goods” due to their high sugar content. With the elimination of this cess, a single 40% GST rate has been implemented, simplifying tax compliance while reinforcing the government’s objective to discourage excessive intake of such products. This updated GST framework offers reduced rates for fruit-based and plant-based beverages, promoting healthier consumption habits, while still placing sugary carbonated drinks in the highest tax bracket. Alcoholic beverages continue to be excluded from the GST regime, remaining under state Value Added Tax (VAT).
Classification of Products and HSN Codes
To clarify classification issues, the GST Council has redefined cold beverage categories. Businesses are required to apply the appropriate Harmonized System of Nomenclature (HSN) codes on invoices to ensure accurate tax compliance.
| Category Description | GST Rate | HSN Code |
|---|---|---|
| Plain non-purified, non-aerated, non-mineral, non-packaged water | 0% | 2201 |
| Non-alcoholic Toddy, Neera including date and palm neera | 0% | 2201 |
| Water other than aerated, mineral, distilled, medicinal, or demineralised (not sold in sealed unit container) | 0% | 2201 |
| Tender coconut water (pre-packaged and labelled) | 5% | 2009 89 90 |
| Tender coconut water (not packaged and labelled) | 0% | 2009 89 90 |
| Fruit or vegetable juices and nut juices (non-alcoholic, may contain added sugar) | 5% | 2009 |
| Waters (including mineral and aerated), not containing added sugar or flavouring | 5% | 2201 |
| Ice and snow | 5% | 2201 90 10 |
| Plant-based milk drinks (ready-to-drink) | 5% | 2202 99 |
| Soya milk drinks | 5% | 2202 99 10 |
| Fruit pulp or fruit juice-based drinks (non-carbonated) | 5% | 2202 99 20 |
| Beverages containing milk | 5% | 2202 99 30 |
| All goods including aerated waters containing sugar, sweetener or flavouring | 40% | 2202 10 |
| Caffeinated beverages | 40% | 2202 99 90 |
| Other non-alcoholic beverages | 40% | 2202 91 00, 2202 99 90 |
| Carbonated beverages of fruit drink or with fruit juice | 40% | 2202 |
Ramifications of GST Adjustments on Beverages
Observation in urban cafes and large supermarkets confirms the widespread preference for cold beverages among Indian consumers. However, the regulatory landscape is shifting. Carbonated and flavored drinks, now subject to a substantial 40% GST, are formally designated as “sin goods.” This increased taxation is likely to prompt consumers to reconsider their purchases, leading to a potential reduction in demand for such items. Conversely, the government is incentivizing healthier drink options. Fruit juices, soy-based products, and plant-based beverages now incur only 5% GST, signaling a policy focus on public health. Furthermore, the reduced tax on packaged water and tender coconut water is expected to support the growing wellness industry by making hydration more affordable. For businesses, this revised GST framework provides greater clarity and reduces previous ambiguities in classification, facilitating better long-term planning. The entire beverage industry, from small retailers to major manufacturers, can anticipate a more stable and predictable operational environment.
