In a landmark judgment, a Federal High Court has ruled against the implementation of excise duty on carbonated drinks, dealing a significant blow to the government’s revenue drive. The ruling comes after intense legal battles between beverage manufacturers and the Federal Inland Revenue Service (FIRS), which had sought to enforce the tax.
Background of the Case
The Nigerian government introduced excise duty on non-alcoholic and carbonated beverages in 2022 as part of its fiscal policy to generate additional revenue. The tax, which imposed N10 per liter on soft drinks, was met with stiff opposition from industry stakeholders, who argued that it would lead to increased production costs, job losses, and higher prices for consumers.
Following the introduction of the policy, beverage manufacturers and trade associations filed lawsuits challenging the legality and economic implications of the excise duty.
Court’s Verdict and Justification
In its ruling, the Federal High Court declared the excise duty unlawful, stating that its implementation violated due process and imposed an unfair burden on manufacturers and consumers. The court further argued that:
The policy lacked proper legislative backing.
It would stifle the growth of the beverage industry.
The government failed to conduct adequate stakeholder consultations before its enforcement.
The judgment means that the government can no longer collect excise duty on carbonated drinks unless it appeals the ruling or introduces fresh legislation to legalize the tax.
Industry Reactions
Manufacturers and industry stakeholders have hailed the ruling as a victory for businesses and consumers. The Nigerian Association of Small and Medium Enterprises (NASME) praised the court’s decision, emphasizing that the tax would have led to massive job losses and reduced investment in the beverage sector.
Similarly, the Soft Drinks Manufacturers Association described the judgment as a relief for producers who had been struggling with rising operational costs due to inflation and foreign exchange volatility.
Government’s Next Move
The government is expected to review the court’s ruling and may consider appealing the decision. Alternatively, policymakers might explore alternative tax structures or incentives to offset the revenue loss from the suspended excise duty.
Economists have urged the government to focus on broader tax reforms instead of imposing levies that could harm industries and burden consumers. Others suggest that authorities should look into expanding the tax net rather than overburdening existing taxpayers.
What This Means for Consumers
With the court’s ruling, consumers can expect soft drink prices to remain stable, as manufacturers will not have to pass additional tax costs onto buyers. However, economic factors such as inflation and foreign exchange rates may still influence beverage prices in the long run. The court’s decision marks a major victory for the beverage industry and consumers, but it also raises questions about the government’s ability to generate revenue without imposing burdensome taxes. Moving forward, a balanced approach that supports economic growth while ensuring fiscal responsibility will be crucial.
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Written By Fortune Davidson