Budget 2024 brew: Alcobev players pitch for uniform tax, excise duty cuts; ENA price relief, input tax credit hold key

Budget 2024: The Indian alcohol industry stakeholders, in a concerted voice, seek closure of tax on ENA and a uniform tax system across the country. They also underscore the need for input tax credit.

First Published18 Jan 2024
Budget 2024: Alcobev experts share their wishlist for the upcoming budget. (Photo by Daniel LEAL / AFP)
Budget 2024: Alcobev experts share their wishlist for the upcoming budget. (Photo by Daniel LEAL / AFP)(AFP)

As India is getting ready for the annual budget announcement, the alcoholic beverage industry is brimming with expectations and anxieties. From calls for a unified tax structure to pleas for export incentives, industry leaders have laid out their wish list for Finance Minister Nirmala Sitharaman.

“The industry is brimming with potential, fuelled by a booming premium segment (8-10% growth) and rising disposable incomes. However, navigating this growth responsibly requires a delicate touch. We yearn for a gradual reduction in excise duties, currently exceeding 50% of retail price, to stimulate volume and curb illicit trade. Harmonising state regulations and streamlining permits will unlock operational efficiency. E-commerce, a 5,000 crore giant with 15-20% growth potential, needs a clearer regulatory framework to flourish,” Tushar Bhandari, Whole Time Director, AABL, opined.

Also Read | Alco-bev industry in tight spot over shrinking margins as states keep MRP constant: ISWAI's Nita Kapoor

The alcobev industry currently faces a challenge where it pays Goods and Services Tax (GST) on the procurement of raw materials, packing materials, and services. However, as there is no GST on the final product, which is liquor, the industry is unable to avail of the benefit of the input tax credit (ITC) for the taxes already paid during the purchase of raw materials and packing materials from suppliers. This results in a situation where the industry is unable to offset the GST paid on inputs against the tax liability on the final product, affecting its ability to claim tax credits and potentially impacting overall costs.

“Even on the export of liquor, the industry is not getting the benefit of GST paid on raw material/packing material, and due to this, we can’t offer competitive rates in comparison to other countries’ suppliers. This is adversely impacting the export revenue of the industry as well as the country,” said Nakul Sethi, Director, Finance & Strategy of SOM Group of Companies.

GST unification

Though the taxability of alcoholic beverages is mostly under states’ jurisdiction, the Union budget is relevant for matters related to GST. These arise due to the unique tax anomaly with the alcobev sector – while the final product is outside GST, most of the input costs are under GST, and there is no set-off mechanism, said Vinod Giri, Director General of Confederation of Indian Alcoholic Beverage Companies (CIABC).

Avneet Singh, founder of Medusa Beverages, echoed this view. “By shifting alcobev under GST, we can get the input of all GST paid on raw materials and have one central policy rather than having a different state-wide policy,” he observed.

Dani Chand, founder and chairman of Radiant Manufacturers, urged the government to implement a ‘One Nation One Tax’ on the manufacture, bottling, and retailing of Made-in-India spirits (whiskies, rum, gin, vodka, agave and brandy), wine and beer. This means keeping any Made in India alcoBev under GST, creating a uniform MRP of products across India, thereby decreasing the chances of leakage in government revenue.

The GST Council, in its 52nd meeting, recommended keeping extra neutral alcohol (ENA), the key ingredient in alcoholic beverages, outside the GST net. Additionally, this move was aimed at reducing GST on molasses from 28 per cent to 5 per cent, which would increase liquidity with mills and enable faster clearance of cane dues to sugarcane farmers. This move was intended to reduce the manufacturing cost of cattle feed, as molasses is a key ingredient of it.

“Furthermore, there are issues related to allowing the industry input tax credit, taxability of brand owners’ surplus, and settlement of GST as paid on job work for the period before the clarificatory circular by the Ministry on  October 1, 2021, that we hope are addressed through the Budget. In short, at this stage, we hope the Budget solves our past issues; steps to boost the industry will come only subsequently,” said Giri. 

Can Budget 2024 toast to cheaper booze and booming exports?

Sumedh Singh Mandla, CEO of VBev, emphasised the need for a tax policy that promotes both industry growth and responsible practices. He also highlighted the potential of the Budget to influence international trade dynamics. In other words, the ideal tax policy would benefit businesses while also aligning with ethical and sustainable practices, and the upcoming Budget could be used to strategically position India in the global trade landscape. “Advocating for impactful Free Trade Agreements (FTAs) with other nations to unlock new opportunities for the beverage sector, elevating global competitiveness, and opening new markets for Indian beverages.”

“From the union budget, we expect and hope for the import duties on alcohol products like spirits, beers & wines to come down. It is presently 150%. The FTA ( free trade agreement) has warranted that this happens. There are talks and negotiations that this could drop to 100% and later to even 50%. We are eagerly anticipating if any lowering of the import duties will be announced in the Budget 2024,” Ajay Gowda, Partner, Byg Ventures, opined.

Favourable trade policies and incentives for export-oriented businesses can also help boost international expansion, along with easier access to global markets and financial support for export activities, said Ishwaraj Bhatia, COO of Simba Beer.

ENA's loyalty: From cocktail king to biofuel darling?

In June 2021, the Narendra Modi government set a goal of achieving a 10% ethanol blending rate in petrol by November 2022. This milestone was reached five months ahead of schedule, as mentioned during the foundation stone-laying ceremony for Kribhco’s bioethanol plant at Hazira on the outskirts of Surat city, according to an official statement in 2022.

Having attained this objective ahead of time prompted the government to accelerate the target for 20% ethanol blending, moving it up to 2025, the statement added.

“As a burning priority, we want the Union government to bring closure to the matter of GST on ENA, the primary raw material used for making liquor. The GST Council had recommended for it to be kept out of the GST net in its meeting last October, but the notification is yet to be issued to operationalise it, which is causing great uncertainty in the industry,” Giri added.

“As a consequence, the pricing of un-denatured alcohol meant for alcohol production has been fluctuating, leading to a 9% increase in ENA cost over the last 12 months. Given the importance of the alco-bev excise collections to states, ISWAI urges for a more temperate blending target,” Nita Kapoor, CEO of the International Spirits and Wines Association of India, stated.

“While the alco-bev industry continues to evolve in terms of consumer preferences, new opportunities for the sector can be unlocked through standardised pricing, centralised policy, and a sustained policy regime,” Riyaaz Amlani, Founder & Managing Director, Impresario Entertainment & Hospitality said.

Advocating low-sugar content drinks, Siddharth Saraf, co-founder of Vaum Tonicst, said he expects to see a reduction in the current 40% GST (28% + 12% cess) on flavoured aerated drinks. “A reduction on GST for certain products with a lower calorie content could incentivise the alco-bev industry to invest more in the development of low-calorie options, aligning with global health trends and encouraging consumers as well to make healthier choices,” Saraf noted. 

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.MoreLess
HomeIndustryBudget 2024 brew: Alcobev players pitch for uniform tax, excise duty cuts; ENA price relief, input tax credit hold key

Most Active Stocks

Bharat Electronics

10:29 AM | 14 JUN 2024
8.6 (2.86%)

Indian Oil Corporation

10:25 AM | 14 JUN 2024
1.2 (0.71%)


10:28 AM | 14 JUN 2024
16.55 (1.05%)

State Bank Of India

10:29 AM | 14 JUN 2024
-3.7 (-0.44%)
More Active Stocks

Market Snapshot

  • Top Gainers
  • Top Losers
  • 52 Week High

JK Paper

10:25 AM | 14 JUN 2024
44.35 (9.94%)


10:22 AM | 14 JUN 2024
23.05 (8.03%)

Poly Medicure

09:59 AM | 14 JUN 2024
142.9 (7.68%)

KEC International

10:25 AM | 14 JUN 2024
66.25 (7.62%)
More from Top Gainers

Recommended For You

    More Recommendations

    Gold Prices

    • 24K
    • 22K

    Fuel Price

    • Petrol
    • Diesel
    New Delhi
    HomeMarketsloanPremiumGet App