GST’S SUGAR DILEMMA: WHY ARE SOFT DRINKS 'SINFUL' BUT SWEETS ESSENTIAL?

This post is authored by Saksham Sharma, a 4th-year student at Gujarat National Law University

INTRODUCTION

From the 22nd of September, 2025, India's GST regime brings one large change: all sweetened soft drinks (sweetened, carbonated, caffeinated, tasty non-alcoholic drinks, etc.) will receive a 40% tax, placing them in the same tax bracket as tobacco and cigarettes. At the heart of the outrage is the reality that a lot of sweets, bakery items, cakes, and other solid foods high in sugars (even similar ones like Pastry, Cakes, Biscuits, Jams, Fruit jellies, etc.) are not receiving this sort of heavy taxation.

Why does this gap matter? First, from a fairness-at-law perspective, laws need not disproportionately penalise one substance over another when both pose similar risks. Second, from a public health communication perspective, listing soft drinks as “sin products” but not confections may send mixed signals. Third, the economic impact: the taxing and regulating of specified products containing sugars affects consumers, small businesses, and even health care systems.

This blog will delve into the scientific merits of the treatment, the constitutional principle-based policy and law consistency, gaps for regulation (like warning labels), and economic/political reasons that could account for sweets not being included. The endeavour would be to identify whether the policy stands fair and reasonable or not, and what change would render the policy consistent.

This blog argues that the GST Council’s classification of sweetened soft drinks as “sin goods”, without any clear health-based criteria, fails the test of non-arbitrariness under Article 14 of the Constitution of India. It risks turning fiscal regulation into moral regulation, punishing “visible” corporate sugar (90% held by Coca-Cola and Pepsi) while leaving “traditional” sugar untouched.

GST CLASSIFICATION AND RECENT MODIFICATIONS

India's GST system places goods into a number of slabs; the highest slab (headed as "sin goods" or high-end/luxury goods) now includes carbonated and caffeinated beverages. Following an amendment by a recent Notification by the Ministry of Finance (Department of Revenue) through Notification No. 9/2025–Central Tax, carbonated drinks, caffeinated drinks, and "other non-alcoholic drinks" with flavouring or sugar added fall into a GST slab of 40% (this includes the previous GST slab of 28% and a compensation cess of 12%).

Conversely, sweets and confectionery (highly sweetened solid foods such as confectionery, cakes, and pastry) continue to remain GST-taxable at lower rates (typically 5%, occasionally 18%), depending upon the specific class. Traditional sweets continue to be under the GST slab at significantly lower rates, even though the sugar level is extremely high.

The argument put forward by the government is based on the idea that the slabs have been rationalised and all the aerated drinks, which were put in 28% GST + 12% Compensation Cess, have now been put up under one single 40% GST.

Yet, there exists no explicitly published public standard describing why these drinks have been placed in the "sin" slab, while other sweet products don’t come under the same. This raises the question of how the thresholds get measured, as before the said rationalisation exercise, the rates of sweet products were at 12% and 18%, so there was a smaller gap between them and the other carbonated drinks in GST terms. The increased taxation on aerated drinks then was due to the Compensation Cess, which was a temporary measure set to expire in 2026, but with a collective 40% rate together, it is now a part of the core GST Framework.

However, this “rationalisation” lacks a transparent policy basis. The Council’s decision is justified as a public health measure, yet there is no published evidence or threshold defining how sugar concentration, caloric density, or consumption pattern justified this 40% rate. This absence of measurable criteria raises a constitutional concern, whether a classification is based merely on form (liquid vs. solid) or on harm. This attracts the equality test under Article 14.

LEGAL AND POLICY ANALYSIS

One of the prime constitutional law principles governing India is equality before the law/equal protection pursuant to Article 14 of the Constitution of India. The laws cannot discriminate arbitrarily, i.e., the distinction must be based on intelligible differentia and the laws must reasonably relate to the aim sought to be achieved as laid down by Hon’ble Supreme Court in the Reasonable Classification Test in State of West Bengal v Anwar Ali Sarkar from which it can be inferred that if two things cause about the same amount of harm, treating one more harshly than the other seems unfair unless there is a good reason for it.

Hon’ble Supreme Court has consistently held this classification under Article 14, and it must satisfy two conditions as seen in the landmark case of Ajay Hasia v Khalid Mujib.:

i. An Intelligible differentia

ii. A Rational Nexus to the object sought to be achieved

Here, the difference between liquid and solid sugar is intelligible, but its nexus with the objective of reducing sugar consumption remains unproven. No official study or regulatory document demonstrates that a 40% GST on beverages will produce greater health benefits than taxing sweets equitably based on sugar content, which was found to be more effective and has been effectively implemented in the U.K. on soft drinks.

While it is true that studies demonstrating the success of sugar-content–based taxation (such as those from the U.K.) emerged only after the enactment of such laws abroad, India’s GST classification still lacks any contemporaneous domestic study or data-driven rationale demonstrating why liquid sugar warrants harsher treatment than solid sugar. Without such prior or parallel evidence, the policy’s health justification remains empirically weak.

This selective enforcement reflects what may be called fiscal moralism, meaning the State taxing large-scale, visible and organised corporate sugar while leaving unorganised (90% of Indian sweets are unorganised), traditionally embedded sugar untouched. Such inconsistency not only weakens health justification but also risks discriminatory economic impact.

Even assuming enforcement challenges exist in the unorganised sector, such limitations cannot justify a health-based tax design that penalises one form of sugar while exempting another. Enforcement feasibility is a logistical concern; equality under Article 14 is a constitutional command. The government’s ability to collect 5% GST from the same sector disproves the claim that it is ‘untaxable’.

Applying Article 14, one would question whether taxing soft drinks at 40% but taxing sweets at much lower rates would constitute a breach of the principle of non-arbitrariness or equal treatment. The GST policy would have to show the differential treatment as logistically connected with the impact of health, rates of consumption, or the like.

Regulatory consistency forms part of the broader doctrine of policy coherence: where the State claims to act on health grounds, its fiscal, regulatory, and consumer protection measures must align. Tobacco also involves numerous legal requirements (warnings, packaging, and restrictions), which support its high taxation. If soft drinks are taxed correspondingly but without corresponding requirements (warnings, labelling, consumer information), the legal argument for taxing them equally as tobacco is undermined, because one element of what makes tobacco a "sin" under the law is that the risks are explicitly revealed and regulated.

The major issue that arises here is that the differentiation between carbonated drinks and other sweets is huge, with the former being in the Demerit Slab (not even the Standard Slab) and the latter being in the Merit Slab. This creates a huge disparity as these drinks are effectively a sin good while the other sweet products remain “essential” in the government’s eyes. Industry associations (e.g. Indian Beverage Association) and think tanks have opposed this rationalisation move as being anti-industry and innovation therein and have also pointed out that being disproportionately targets the middle-income households.

CONCLUSION AND RECOMMENDATIONS

The new GST regime's imposition of a tax of 40% for sugary soft drinks makes a genuinely concerned gesture by the government on determining the incidence of taxation and differentiation of the same from similar products. The omission of confectionery products and other solid high-sugar foods from corresponding increased taxation, as well as the omission of complementary regulatory actions like drink product warning labels, nevertheless introduces inconsistencies. They introduce questions of lawful fairness as well as questions regarding the arbitrariness of taxation by the government.

The constitutional validity of this policy depends not on its intention but on its implementation. A health tax must operate on objective indicators, as recognised by the ICRIER Report in September 2024, which recommends a layered-sugar tax based on sugar content rather than a regressive tax structure based on product categories that ends up disproportionately affecting low-income groups.

To align policy with both scientific and legal standards, several changes are recommended:

• Introduce a “Sugar Disclosure Index” under the GST framework.

  
  

• Create a mandatory disclosure mechanism; each manufacturer must declare grams of added sugar per 100g/ml on the GST return. This could serve as a factual basis for future evidence-based rate rationalisation, rather than ad-hoc categorisation.

  
  

• Any item taxed as a “sin good” should carry a GST-linked label that creates consistency between fiscal and consumer-protection rationales, paralleling tobacco-style transparency.

  
  

• Promote co-regulation with FSSAI and State Health Departments, where, rather than the GST Council acting alone, it requires that future fiscal classifications consult the FSSAI and MoHFW for sugar thresholds and health impact data. This ensures coherence across fiscal and health regulation, strengthening the “rational nexus” test.

  
  

Such reforms would align fiscal design with constitutional principles of equality and non-arbitrariness. Until then, India’s GST framework on sugary goods appears less a fight against sugar and more an instance of selective moral taxation, one that reflects administrative convenience more than constitutional coherence.