Mumbai: Indian and foreign wine companies are lobbying for a uniform sales tax and excise duty structure across the country that will enable them to price their products the same across India.
Mint had reported on 8 January that the Planning Commission, India’s apex planning body, had recommended that this be done for all kinds of liquor, not just wine.
The winemakers are collectively lobbying for this with state governments and the Centre. Indians consume about a million cases of wine (each case has 12 bottles) every year.
“A uniform and rational duty structure on low alcohol drinks such as wine and beer will not only help the companies sell their products at the same price across the country but also lower the prices of such products (in some states),” said Alok Chandra of Gryphon Brands Inc., a wine industry consultant firm in Bangalore.
Chandra added that while the Union government had proposed such rationalization, a final decision by the state governments is awaited.
Liquor is a state subject and duties vary widely across states. For instance, excise duty can range between Rs25 and Rs500 per litre on Indian-made foreign liquor or IMFL. The excise duty on wine ranges from Rs70 a litre to a high of 200% of the base price of the wine. Maharashtra imposes the highest duty of 200% of the declared cost of a bottle.
In November, Maharashtra hiked the excise duty on wines from 150% to 200%, resulting in an overall price escalation of Rs200 to Rs1,000 per bottle of imported wine in the state. The price hike in Maharashtra has also led to increased grey market operation, as most of the state now follows a duty structure of 100% to 150%, according to some retailers in Mumbai.
Most states charge multiple taxes on liquor, which is an important source of revenue. While pitching its proposal calling for uniform tax rates across the country, the Planning Commission had said that disparities in tax rates made inter-state commerce difficult and led to tax evasion, illicit distillation, and smuggling.
India has five large local producers of wine —Champagne Indage Ltd, Sula Vineyards Ltd, Grover Vineyards Ltd, UB Group and Renaissance Vineyard Ltd—and three multinational firms that operate in the market—Diageo India Pvt. Ltd, Seagram India Pvt. Ltd and Moet Hennessy India Pvt. Ltd. There are also about 15-20 large-scale importers operating in the country’s premium wine market.
“A rational and uniform duty structure will definitely attract more serious players and it will contribute tremendously to the overall growth and expansion of the wine market in the country,” said Abhay Kawedkar, business head at United Spirits Ltd, part of the UB Group.
In 2007, India had removed a special additional import duty on foreign liquor, including wine, in keeping with its commitment to the World Trade Organization.
The US and the European Union had complained to the WTO earlier in 2007 that the additional duty levied by India went against these commitments. While this reduced the price of imported liquor in India, prices still continue to vary across states because of divergent local tax regimes.