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I was asked by a reader about 5 years ago if the introduction of GST would affect wine sales or prices in any way. My answer was simplistic; we are far away from the GST regime and yes it would have a material positive effect on the prices of wine, but more importantly it would make the business of wine much simpler. I was skeptical though, of GST to be implanted within a couple of years of that question and my doubts about government being serious about wine as it always treated wine and spirits on the same plane.
Unfortunately, the state governments have continued to use taxes on alcohol including wine as a tax resource-without really giving much abeyance to the Constitution which says that the States must try to introduce prohibition. Kerala and Bihar are the two states that have gone dry during the last couple of years but more for political compulsions. The States do not want to let go of the magical wand that can also be used to create the fear psychosis. The more pragmatic ones know it is impossible to have effective prohibition. It is a matter of record that the prohibition in USA was a total flop. Today there are 50 states that grow grapes and make wine from these grapes.
Let us support AIPWA’s efforts
All India Wine Producers Association (AIPWA)’ s efforts to bring wine under GST to boost the industry are legitimate, justifiable and worth paying attention. The inter-state excise duty on wine and procedures are so different and diverse in every state that they are detrimental to selling wine in many states. Tamil Nadu does not even allow Indian wines to be sold, with the plethora of State laws. The fact that wine is smuggled in a big way is not considered relevant. This problem would be alleviated if wines (and beer because of low alcohol) were brought under GST. This might even result in lower consumption of hard liquor, in a Utopian world.
Yatin Patil, the president of AIPWA, reportedly says, "We made all efforts at the state and central levels, but the government excluded alcoholic beverages from the ambit of GST. We want the government to treat wine as agro product and bring it under GST. Wine is produced in only Maharashtra and Karnataka. Hence, the government needs to promote wine industry.”
His point is well taken."We will approach state finance minister Sudhir Mungantiwar soon and urge him to pursue the issue with the central government. We will also approach the central government in this regard," he says.
It is interesting to note that Maharashtra had imposed Rs. 300 as import duty for wines coming from any State, making wineries like Bangalore based Grover to an advantage for sales in Maharashtra. As expected, Karnataka imposed the same conditions on wines coming from out of Karnataka, making the Maharashtra producers at the same disadvantage. Eventually, water found its natural level and now Grover has a winery in Maharashtra (Zampa) and producers like Sula and Fratelli have made arrangements to produce wines in Karnataka, creating inefficiency in the process.
Maharashtra has made the wines excise-duty free if sold within Maharashtra. Besides, their is VAT of 20% that was imposed almost a decade ago. With protests from the producers, the finance department of Maharashtra decided to compensate 16% back to the producers which they coolly pocket as a source of income. Initially, it was refunded annually but then made twice a year. Smaller producers didn’t have the structure to get this refund. Now, reportedly for the past over 18 months the refund has not been made due to paucity of funds. Perhaps, a GST would have alleviated this problem.
VAT on wine is a ridiculously high at 70% in Andhra Pradesh and 50% each in Tamil Nadu and Kerala. This is perhaps a good indicator of why States won’t want to be a part of the GST regime. But the world is changing. And the times are-a changin’.
We support the efforts of AIWPA and hope they will continue their struggle and lobbying. We will say Jai Ho to their efforts. Jai Ho!!
Subhash Arora |