Varun Beverages shares fall 5% on possible hike in GST rate to 35%

Varun Beverages shares have surged 45 percent in a year.

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Shares of PepsiCo bottler Varun Beverages cracked 5% in the morning deals on December 3, a day after report suggested the GST rate on aerated beverages might be hiked to 35%, up from the current 28%.

At 9.40 am, Varun Beverages shares were quoting Rs 621.45, lower by 1.7% on the NSE after trimming some of its early losses.

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The Group of Ministers on GST rate rationalisation has recommended to raise tax on aerated beverages, cigarettes, tobacco and related 'sin' products to 35% from the current 28%, CNBC-Awaaz along with PTI News said quoting sources familiar with the development on December 2.

The proposal implies a new 35% GST rate slab could be created for tobacco and related products, as recommended by the GoM.

"The GoM has agreed to propose a special rate of 35% on tobacco and related products and aerated beverages. The four-tier tax slab of 5, 12, 18, and 28% will continue and a new rate of 35% is proposed by the GoM," an official told PTI News.

India's carbonated soft drinks segment struggles to achieve its scale potential due to hurdles like high GST taxation, despite government initiatives such as 'Make in India' and 'Aatmanirbhar Bharat,' according to a report by economic think tank ICRIER.

"However, despite government initiatives like 'Make in India' and 'Aatmanirbhar Bharat', the carbonated soft drinks segment is unable to reach its potential in terms of scale expansion due to barriers such as the high tax brackets and compensation cess under the GST regime, implemented since 2017," said ICRIER.

Varun Beverages shares have surged 45 percent in a year, as compared to the Nifty 50's run of 18 percent during the same time period.

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