State Govt Moots New Liquor Duty

MUMBAI: The Maharashtra government is mulling a plan to levy a duty of Rs 300 per litre of imported liquor, replacing the existing ad valorem rate of 200%.

The move has triggered intense lobbying by multinational liquor companies and the domestic industry to influence the government’s policy. The local spirit lobby wants the duty structure to remain unchanged to ensure a level-playing field.

Multinational companies, supported by the WTO and the Scotch Whisky Association, want the existing structure to be revamped as there are few takers for their brands in Maharashtra. For example, under the present duty structure, Johnnie Walker Black Label is priced at Rs 7,500 or more while it is available at Rs 1,800 in the grey market.

States started taxing imported liquor after the Centre abolished the additional duty after conceding to a WTO demand. When the duty was removed, the Centre asked state governments to levy duty on imported spirits to offset the revenue loss.

Maharashtra levied an ad valorem duty of 200%, about the same rate levied on the domestic spirit. Ad valorem is the rate levied at the time of a transaction.

The All India Distillers’ Association says reduction in duty would deprive the domestic industry of a level-playing field. They want prices of imported spirit in Maharashtra to be in the range that prevailed before the Centre removed additional duty.

The association’s director general, V N Raina told ET: “We want the ad valorem duty structure to continue. For example, levy of Rs 300 on a bottle worth Rs 3,000, cannot be effective. At the same time levying 100% on a Rs 3,000 bottle, also is not fair. A slab rate levying different rates and different category products would provide justice to all.” States such as Sikkim and Andhra Pradesh have already implemented such a duty structure, he added.

The new duty structure has affected multinational companies as their retail prices have gone up by 200%. Sales of high end products are down. Even hotels that are allowed to import duty free foreign spirits, are finding it difficult to sell such products. Multinational companies have also said that while the official figure of scotch whisky sold in India is 100,000 cases, scotch whisky brands sold in the grey market are in the range between 600,000 to 800,000 cases.

However, the distillers’ association thinks an ideal system is the kind of structures put in place in states such as Sikkim and Andhra Pradesh where duty rate is structured in slabs so that high end products are levied a lesser rate while lower segments are taxed appropriately, providing a level-playing field to the domestic industry.

The domestic industry pays huge excise duty to the state, nearly Rs 4,000 crore in Maharashtra, Rs 3,000 crore in UP and Rs 700 crore in Delhi. The excise revenue from liquor industry is the largest revenue source to most states.