An analysis done by industry body The International Spirits and Wines Association of India for TOI has estimated that a bottle of liquor – meaning whisky, rum, vodka and gin – that costs Rs 100 in Goa could cost Rs 134 in Delhi and even Rs 513 in Karnataka (see image).
At 49% of the MRP, the levies in Goa are certainly not low. But they are much lower than the 83% in Karnataka and 71% in Maharashtra. The price index takes into account the import duties levied on the overseas product, which will be common across states. Foreign players have long been demanding a reduction in import duties on wine and spirits, which amount to up to 150%. The overseas players are seeking to reduce tariffs through the free trade agreements being negotiated with Britain and the European Union.
Due to local taxes, there can be a difference of more than 20% in the price of a bottle of popular Scottish brands in Delhi and Mumbai. A bottle for example Black label which costs around Rs 3,100 in Delhi, sells for around Rs 4,000 in Mumbai. The huge difference in taxes is also a reason for smuggling alcohol across state lines.
Unlike most goods and services, alcohol and petroleum are among the items currently excluded from the GST, resulting in multiple levies and tax rates across the country.
As state finances lose virtually control of taxes, at least individually, they are milking the only remaining resources: alcohol, gasoline, diesel and property taxes. So when their own tax revenues come under pressure, state finances increase taxes on alcohol and VAT on petrol and diesel. Or states that offer freebies often resort to higher duties on these products as they receive only a portion of the GST from the Centre.
While there is discussion about including petroleum products like petrol and diesel within the GST net, alcohol is nowhere to be seen. What it also means is that consumers also have to deal with the cascading effect, unlike GST where most goods and services get a tax benefit.
With the excise cycle set to kick off in states next month, the industry is keeping a close eye on developments.