New Delhi: Prices of imported wine and other liquor could vary widely across the country in the wake of the government’s proposal to withdraw the additional import duty and allow states to levy their own duties on the category. Retail prices of imported wine and liquor could increase by Rs200-300 a bottle in New Delhi and Mumbai, the two largest markets, while they could decrease by the same amount in states and Union territories (UTs) such as Goa, Puducherry, Chandigarh, Punjab and Haryana.
The additional import duty was targeted at ensuring that local wines and spirits, which have to pay local levies imposed by the states, aren’t at a disadvantage compared with imported ones. The new local levies that states will impose, however, will not be uniform because some states levy a duty that increases with the price of the bottle while others levy a duty that is a fixed percentage of the price.
The Union cabinet will soon consider a new Bill allowing states to levy a countervailing duty in place of an additional customs duty. The finance ministry is expected to table the Bill in Parliament, when it reconvenes after recess on 26 April. Maharashtra and Delhi levy a duty on Indian Made Foreign Liquor (IMFL) on an ad-valorem basis, which means that the tax increases with the value of the bottle. They will levy a similar duty on imported liquor. Other states that levy ad-valorem duties on IMFL include Tamil Nadu, Andhra Pradesh and Kerala. However, the ad-valorem duties imposed in these states are not as high as the ones in Delhi and Maharashtra. Hence, retail prices of imported liquor in these states could either increase marginally or remain the same, a liquor firm executive, who did not wish to be identified.
States and UTs such as Goa, Puducherry, Chandigarh, Punjab and Haryana levy a duty which is a fixed percentage of the cost of the bottle. “Prices of liquor in Goa are, on an average, 20-25% cheaper than in the rest of the country. Similarly, though Haryana has imposed a local restriction that no Scotch should sell in the state for less than Rs1,000 per bottle, the sale price of some Scotch brands is Rs800-900 since the margins there are high on account of low taxation and zero sales tax,” said the executive.
Nearly all states levy multiple taxes on wines and spirits. The taxes are levied at the point of consumption and not at the point of manufacture unlike other goods.
The Union government does not have a database of existing excise duty and sales tax on liquor across states. The last available database was compiled by the food ministry in 2004-05.
Delhi and Maharashtra have the most complicated duty structure. Maharashtra, for instance, levies an excise duty of 200% on the declared manufacturing price, which is usually 25% of the maximum retail price. In addition to this, Mumbai (city) levies an octroi of 7.14% on the landed cost and a value added tax of 20% on the maximum retail price.
Similarly, Delhi imposes a special duty of Rs15 on a 750ml bottle, Rs7.50 on a 375ml bottle and Rs3.60 on a 180ml bottle. In addition to this, there is an import pass fee, a levy that has to be paid on liquor brought from outside the state, of Rs3.75 per bottle, and a 20% sales tax.
Imported liquor brands also have to pay a one-time label registration fee of Rs10,000 (whisky and rum) or Rs3,000 (gin, vodka and wine).
Chandigarh and Punjab have low sales tax rate of 4% coupled with low excise duties and import pass fees. Goa levies 22% sales tax but collects a low excise duty. Karnataka introduced a different duty structure three years ago on IMFL by doing away with sales tax altogether and introducing an additional excise duty in its place. This duty depends on the price of the bottle and could be any of nine rates.