NEW DELHI: With a new excise regime becoming operational from November 17, Delhi government notified reduced value added tax on liquor on Friday. Industry experts, however, expect retail prices to go up 8-10%.
Delhi government’s finance department notified some amendments in the Delhi Value Added Tax Act, 2004, which now mandates a fixed 1% VAT on alcohol sold by a wholesaler to a retailer from November 10. The on foreign liquor and Indian made foreign liquor consumed off premises from the retailer has been reduced to 1% from November 17. However, for consumption on the premises of hotels, clubs and restaurants, VAT will remain 25%.
“While VAT used to be 25% and has been reduced to 1%, this will have no real impact on prices because the entire pricing structure has been changed,” explained Vinod Giri, director general, Confederation of Indian Alcoholic Beverage Companies. He said that instead of a nominal rate charged for a retail license plus excise duty and VAT, the government has factored these into the base price for the auction. License holders who bid more than the base price, Rs 225 crore for most locations, will want to recover the amount and some licensees, Giri said, had demanded a hike of 30-35% on the maximum retail price.
Such a hike would have meant Delhiites buying cheaper liquor in the neighbouring states. “Going by the pattern, you are realistically looking at the new prices being 8-10% higher than earlier,” Giri said.
With VAT and excise subsumed in the license fee, a Delhi government official said the price would now depend on the competitive forces. “The new policy allows discounts too, so we could actually expect the prices to go down,” the official added.
The excise department has asked all current liquor licence holders, from guest houses to restaurants and hotels, to migrate to the new excise system by November 16. They will also have to pay the difference in the previous and new license fees for a period from November 17 to March 31, 2022.