An analysis done by industry body The International Spirits and Wines Association of India for TOI has estimated that a bottle of spirit – which means whisky, rum, vodka and gin – that costs Rs 100 in Goa can cost Rs 134 in Delhi and as much as Rs 513 in Karnataka (see graphic).
At 49% of the MRP, the levies in Goa are by no means low. But they are much lower than the 83% in Karnataka and 71% in Maharashtra. The price index factors in the import duty levied on the overseas product, which will be common across states. For long, foreign players have been demanding a reduction in import duty on wine and spirits, which adds up to 150%. The overseas players are seeking reduction in tariffs through the free trade agreements being negotiated with the UK and the European Union.
As a result of local taxes, there can be a difference of over 20% in the price of a bottle of popular Scotch brands in Delhi and Mumbai. For instance, a bottle of Black Label that costs around Rs 3,100 in Delhi sells for around Rs 4,000 in Mumbai. The vast difference in taxes is also a reason for smuggling of alcohol across state borders.
Unlike most goods and services, alcohol and petroleum are among items that are currently out of GST, resulting in multiple levies and tax rates across the country.
With state FMs virtually losing control over taxation, at least individually, they are milking the only remaining sources – alcohol, petrol, diesel and property tax. So, when their own tax revenue is hit, state FMs raise the levy on alcohol and the VAT on petrol and diesel. Or states that offer freebies often resort to higher levies on these products as they only get a share of the GST from the Centre.
While there is discussion around bringing petroleum products such as petrol and diesel within the GST net, alcohol is nowhere in sight. What it also means is that consumers have to also deal with the cascading effect unlike GST, where most goods and services get input tax credit.
With the excise cycle in states scheduled to start from next month, the industry is keeping close tabs on the developments.