Varun Beverages shares fall up to 3% following GST rate rejig; here is why

One of the names that is expected to take a hit is Varun Beverages. Varun Beverages Ltd. (VBL) is a major Indian franchise bottler and one of the world's largest franchisees for PepsiCo, manufacturing and distributing a wide range of PepsiCo's products like Pepsi, Mountain Dew, 7UP, Tropicana, and Aquafina.

In the early trade, the stock slipped as much as 3% to ₹490 on the NSE. Last seen, shares were trading at ₹500.50, down 1%.

Shares of the company are expected to fall today as popular soft drinks, such as Coca-Cola and Pepsi, along with other non-alcoholic beverages, will become costlier, with the GST Council on Wednesday approving a hike in the tax rate on carbonated beverages to 40% from 28% at present.

As part of the reforms of the Goods and Services Tax (GST), the council increased the rate on carbonated beverages of fruit drinks or carbonated beverages with fruit juice to 40% from 28%.

The council also hiked the GST rate on caffeinated beverages to 40% from 28%.

Other non-alcoholic beverages will also become costlier, as the GST rate on these items has been increased to 40% from 18%. Major companies manufacturing or distributing caffeinated beverages in India include Coca-Cola, PepsiCo, Nestlé, ITC Ltd, Hindustan Unilever, Amul, and Parle Agro, with other players like Tata Coffee, Starbucks, and Red Bull.

The GST council has also raised the rate on all goods (including aerated waters) containing added sugar or other sweetening matter or flavouring to 40% from 28%.

On the other hand, the rate on fruit pulp or fruit juice-based drinks (other than carbonated beverages of fruit drink or carbonated beverages with fruit juice) has been cut to 5% from 12%.

Similarly, plant-based milk drinks, ready for direct consumption as beverages, will become cheaper with the GST rate being reduced to 5% from 18% earlier, while that of soya milk drinks has also been cut to 5% from 12%.