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Delhi Wine Club
 
Excise Quagmire in Delhi and India

Posted: Saturday, 05 November 2016 14:29

 

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Blog : Excise Quagmire in Delhi and India

Nov 05: A piquant situation arose in Delhi last week when the excise department started levying restaurants and hotels additional duties of 20/30% on imported wine and liquor despite the excise policy announcing no change in the taxation. As expected, this was rolled back yesterday but brings back the perennial question and fear that if customs duties are withdrawn after a possible EU-FTA agreement in a few years, the excise departments in different States might misuse their powers and increase excise duty and neutralise most of the positives

I was surprised to get a message from one of our restaurateur readers who had read my previous Article on Excise in delWine in which I had mentioned that the excise policy remained unchanged except the grant of a new license for distributors where only Rs. 7-7.5 lakhs would be payable instead of Rs. 15 lakh (Rs.15,00,000) for the current license which allows both.

He said that from this year the restaurants in Delhi would have to pay 20 % additional duties on imported wines and liquor. I thought perhaps the government had decided to charge it on imported liquor though still wondering how they could do it when the excise policy announced after a delay of 6 months, did not mention it. He checked up from the excise department and re-confirmed that in fact it was applicable to imported wines as well and naturally was quite agitated.

A quick check up from my resources confirmed what he said. But the details went one step further. Last year, In fact the department through a notification had added 20%/20%.30% on Indian wines and liquor for restaurants/clubs/ hotels. In fact, one 5-star hotel F & B manager confirmed that the cost of Indian wines had gone up and that’s why they were not encouraging their sale. So much for the ‘Make in India’ initiative by PM! Or was it a BJP vs. AAP battle showing its ugly face for this petty issue!!

Another source also confirmed that in fact the department had already started collecting additional duty. But also that due to several visits by the hotels and restaurants, the department had realised it was perhaps illegal to add excise duties without the policy notification. He assured me that in fact, the file had been sent to the financial controller to roll back the duties and refund the extra amount. Incidentally, this extra duty is paid by the hotels directly while the basic duty is first-point and the supplier has to pay before ordering the release from the excise bond and is online. His information was that it would be rolled back by the 4th November or latest by Monday the 7th, today being a Saturday, a holiday.

Sure enough an official message from excise came late yesterday and I quote- delhiexcise.gov.in says:

1. This is for your information that Hotel, Club and Restaurant are being charged 30%, 20%, 20% extra excise duty respectively at the time of applying Purchase order for Foreign Liquor. It is here by informed that this was done as per software change specifications approved by Dept.

However based on the Licensee feedback, this change was again discussed with Dept. and extra excise duty charge for Foreign Liquor will be rolled back/ resolved on 4th Nov. 16.

2. Hotel, Club and Restaurants who have already applied for PO for Foreign Liquor and have been approved by Dept. their excessive excise duty amount will be reverted in online ledger after due excise order.

It is hard to believe the rollback was due to the representation but the patent illegality of the ad-hoc increase. While the hotels and restaurateurs heaved a sigh of relief, it brings back my always questioning the motives of the excise departments in different states. If and when the customs duties are reduced due to India-EU FTA or any other FTA in future (none has been signed so far, affecting the high customs duty on imported wines), they may somehow increase the excise duties.

Excise duty on alcohol is a state subject and excise departments are known to milk this segment whenever they need some cash for the often wasteful expenditure. What if they find means to put a spoke in the wheel and decide to increase the excise duties to neutralise the positives of any treaty! This is a question that haunts me and should haunt every wine stakeholder. We need to build a wall to protect the consumers against any measures similar to what the Delhi Excise proposed a couple of weeks ago. The increase has been rolled back but with a reasonable certainty one can assume it will come back through a policy decision in the next excise policy.

For an earlier article in 2012 for the Commentery on Excise, please visit

Commentary: Mixed Signals of Duty Reduction on EU Wines

Subhash Arora

 

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