It said it was taking the step because the drinks pose a health risk. Both soft drinks manufacturers have said their products are safe.
Five other states have already announced partial bans on the drinks in schools, colleges and hospitals.
But Kerala is the first to completely ban their production and sale.
The move by the communist government in Kerala in southern India is the most severe reaction to a report released last week by an Indian non-government organisation, the Centre for Science and Environment.
