The initial reaction was of relief, even though the irritation of increase of duties from 100% to 150% was announced on the imported wines on July 3. It took some time for the people to realise that in fact, the premium, expensive wines had even become even more so.
No one seems to comprehend the motive behind the move-not the least the Indian producers who do not see these premium wines in their radar screens when they ask for level playing field. In any case, the fine wines were the fishing ground of the 5-star hotels, which were basking in the glory of their lobbying power and could get away without paying any customs duties and forking out low excise duties; at the fixed amount of Rs. 150 a bottle of less, it was merely an irritant.
But then came a bolt from the blue. Maharashtra, the big daddy of Indian wines, who has been proactive in levying increasing excise duties on imported wines, whether imported from Bordeaux or Bangalore decided to make it just and equitable for all. The 150% duties on the assessable value it was charging for the wines imported from Bangalore were to be charged on all wines whether they were Chateau de Latour (perhaps a $4 bottle) or Chateau Latour ($500 or more a bottle).
Except-and here is the rub;earlier the former might have attracted an ACD of 75% and the latter paid only 20%. Under the equal- justice- to- all policy, Latour too has to suffer the pains of 150% and NOT Rupees 150, as was earlier the case. Since Latour was strictly in the hotels' domain, they have to shell out the extra amount. Result? Says Sanjay Menon, Director of Sonarys, 'Earlier the duty free price to the hotel was Rs. 21,700. Charging a very low profit margin of only 150%, they would retail it for Rs. 53,000 ($ 1300). With the new ruling, the cost will rise to Rs. 60,150. Hotel pricing policies being dictated by the percentage mark ups, it will still attract the same profitability of 150% . Thus the same bottle will now cost Rs. 150,000. The extra VAT of about Rs. 20,000 may be a short change for those who can afford to order it, but does it make a logical sense?
Take another example closer to our horizon- Chablis from Michele Laroche. 'A bottle that costed Rs. 1190 duty free now would cost Rs.2425 under the new Maharashtra State Tax Regime,'says Sanjay.
There are several examples of Scotch prices going up, which are 'shocking and bizarre' as Naresh Uttamchandani of Sovereign Impex puts it. But he is really worried about his Barolos and other fine wines that would cost a bomb in terms of the newly levide excise, to the hotel in Mumbai and bring his sales down.
And amid this entire circus, EU has announced that they plan to suspend the 'agitation' as if they have got the lolly they wanted. Like a union strike being called off after getting a few crumbs and the face saving achieved by scoring a point or two, the suspension od their protest means buckling down. They should have already realised that in the absence of the legislation being in place, the excise duty issue will continue to tickle each state differently but definitely. After all, Sec 47 gives that power and freedom to all states under the constitution. It seems the US has better comprehension; it has so far maintained it will wait and watch before taking any action.
Fortunately, the situation is not as bad for the low end foreign wines unlike some of the inicative prices above. 'Hardy's that costed Rs. 650 in retail would come down to Rs.520 (This magical reduction despite the 150% new duty is because the previously levied special duty of Rs.200 per bulk litre now will have to be removed. They cannot charge the excise duties twice, can they?' says Sanjay. I have no answer for that- I am a mere logical mortal.
The Laroche Chardonnay costing Rs. 966 earlier would cost Rs.780 now- provided the excise department has nothing else hidden under its skin.
So now, the Indian producer is upset, the wine importer is upset and when the hotel purchase department wakes up to place his next order, he will also be upset with the importer, 'cause he still does not know what is awaiting him. The one comunity who must be really pleased are the bootleggers. The sudden increase in prices due to the Great Wine Duties Reduction 2007 means he can sell more at higher -than- before prices.
Hopefully, other states have more empathy. Here is an opportunity for states like Chandigarh, Haryana, Punjab, Karnataka and Saaddi Dilli to realise that wine drinking should be encouraged in relation to other higher alcoholic beverages and reign in the hormonal tendencies to jack up the excise duties and jack the consumers. We should find out, hopefully soon. As of date, no TPs (transfer permits) are being issued and no alcohol is being allowed to be shipped.
There is a state of limbo while people are enjoying.... the Great Indian Wine Duties Circus.
Subhash Arora |
