"We have received feedback from those using the new system. Some find it too time consuming while others located in remote areas have trouble in connecting online," said Mr. Indu Shekhar Mishra, deputy commissioner, excise department, Government of Delhi, according to a report in ET. The department is yet to take a call on when the new system will be made mandatory. "It may take a few months," he said reportedly.
What he omitted to add perhaps was the fact that the computer server systems used for the online operations were outdated for the job-they were slow and occasionally crashed for hours at a time when the new system was loaded on the system and the software had several glitches besides the necessary hand holding required whenever any new technology is installed.
The excise department is working with the implementing agency Tata Consultancy Services to address the glitches in the pilot project that was kicked off on February 15 this year. The department had issued the circular in August 2012 informing the producers, distributors, retailers and on-trade buyers to install the online ordering and excise payment systems, with February 15 as the deadline. The department stuck to its gun, making it a zero business for almost a month starting from this date onwards. By most people’s reckoning this was a poor timing and doggedness on their part, resulting in a loss to the distributors and producers.
The original plan was to make the system mandatory for all the stakeholders in Delhi including liquor retailers, wholesalers, restaurants & bars and hotels from April 1 according to the report.
In a bid to depart from a manual system to keep track of the liquor trade in the Capital and make the trade transparent, the excise department initiated a new system which will not only make it mandatory for liquor wholesalers, retailers and restaurants to book orders online, but also pay excise duty in advance. Suppliers have also been tasked with providing up to date details of stocks available on the same portal.
However, not all stakeholders appear to be happy with the initiative. According to ET, the restaurant owners they are required to pay excise duty upfront which increases their working capital. They have also expressed apprehension about the delays. After an order is placed, a TP (transport permit) is generated allowing the distributor to deliver the goods. They feel that Âif the distributor is unable to supply within the timeframe of 3 days allowed by the TP, their money gets stuck with the government refund/reversal is a lengthy process.
Buyers also have to now create an individual account with the excise department like a smart card or Toll Tag, where advance has to be deposited from which excise duty is deducted every time an order is placed. This further locks up the finance which the small restaurants can ill afford. In the earlier system, not only does the importer have to pay the custom duty of 150% but the distributor pays the excise duty before the material can be delivered. The payment terms which started with 15-30 days several years ago have graduated to 45-90 days and even more for bad paymasters which has made some small importers shut shop.
The report carried by both the Mumbai (29 March) and Delhi editions (31 march) appear to give the impression that the government is likely to postpone the implementation of the system. If that were the case, it would be a gross injustice on the part of the department shutting down the business of all the importers in Delhi from 15th February when the system was made compulsory for the distributors, retailers and restaurants. In the absence of proper systems including scanners, software with glitches and the computer servers that kept on crashing with unfailing regularity, no deliveries were made, at least of the imported wines for one full month!
It was only after the internal deliberations and genuine pleas of the stakeholders that the department had let up and made an exception in the case of restaurants which were not required to have the new online systems immediately. During that period, delWine had also carried an article complimenting the excise department for modernisation but suggesting that they should have gone slowly and with a parallel system running, after April 1. The excise department may have lost some revenues but the distributors lost the total sales in this period.
The circular issued in March is indicative of an indefinite extension. The scanning is the most cumbersome part of the whole process. According to the importers delWine contacted, the department has also extended the license period for a month and allowed supplies once they deposit Rs. 50,000 for the month of April.
The news report seems to have taken up the cudgel on behalf of the restaurants and hotels that have been putting a squeeze on the hapless importers and distributors and making them pay the customs duty (where applicable) and excise duty which work out to sizable numbers. Based on the stretching payment cycle, the working capital requirement has gone up 3-4 times since the imports began over a decade ago, throwing many of them in a spin and discouraging new entrants. The payment of excise duty is a matter of negotiation between the two but the excise department always must be paid in advance.
Surprisingly, no importer has raised any objection to the system barring the timing and glitches. They expected a hand holding by the software developer TCS and a few other minor irritants to be resolved. One factor that really irks them is that according to the new system, the open platform makes everyone see the stocks and as a marketing strategy they are not happy about it. They have lobbied with the Commissioner who has reportedly given them a sympathetic hearing and they expect this factor to be addressed before the system gets a final go-ahead. But a study of the system at KSBCL in Bangalore would evidence that any of the registered users can see the online stock position of the corporation at any time.
Brindco, the largest importer who also handles 5-6 times as much of Indian liquor including beer is quite pleased with the system. ‘Every progressive distributor would welcome the scheme. It makes the transaction paperless and less human intervention with more transparency. But that the TP time has come down from 2 weeks to 2 days’. In fact, he commended the excise department for being extra vigilant and making sure that the time was cut down as much possible. ‘There are certain issues with the TCS software no doubt. For instance there was a problem with identifying duty free and duty paid goods in the software but TCS has agreed to give a fresh module on Monday,’ says a senior spokesman.
Importers and distributors have a very logical business issue that needs to be addressed for making it a level playing field. Under the present procedure, the buyer can look at the stock position, pay excise duty and get a TP, reducing/blocking that much quantity of the distributor. What if he is a black-listed buyer (and believe me, there are lots of them out there!) who owes money and for whatever reason does not pay and the distributor does not want to deal with him? He can simply go to the site and block the stocks by paying a fraction of the cost. Of course, the distributor is not obliged to supply him but the process of unlocking will involve excise department and considerable delays for the distributor who will suffer unjustly.
What if the wine is on allocation? Every distributor has a few labels which are globally on an allocation and have to be distributed to select costumers. Take the case of Grange or Harlan Estate. The buyer sees 3 bottles on his terminal and immediately clicks on it. Those 3 bottles are reserved for perhaps 3 hotels!! The importers plead that as in the case of KSBCL, there should be a system by which the buyer would get a concurrence from the supplier in the form of a PO before clicking that button asking him to deposit excise. This online procedure can take care of both the problems, they feel.
‘According to the procurement management of a 5-star hotel in the Capital, from the time of placing an order to the time the stock is delivered, the excise department is monitoring each step. The new system is not only complicated and cumbersome, but it is like putting too much government control.’ This seems to be the crux of the problem. Every user feels strait-jacketed. But this could also be partly due to the black sheep in the industry who are involved in counterfeit liquor business and allegedly involved in leakage of revenues.
While this takes us back to the initial issue of high taxation (and each control step involves extra costs including the hidden ones and the hapless customer has to bear the brunt of it all). Nothing short of excise reforms and a total understanding of the market reality is needed to make wine drinking a pleasure, not only for the excise department which has a very successful and assured profitable business of only collecting the revenues.
But in the meantime, modernisation must be carried out to safeguard the interest of the consumer, and making the business of buying and selling wines not as onerous and arduous at present with little returns. The time extension granted by the department should not be assumed as indefinite and all the stakeholders should accept it as part of the modernisation. The excise department will do well to treat the distributors, hotels and restaurants and retailers as the customers and perhaps even start a ‘customer service cell’, monitoring its performance regularly.
For an earlier related article, visit Imported Wine Sales hit Delhi Excise Roadblock
Tags: excise department, TCS, Brindco