Saturday, July 13, 2024

North to South: On the trail for the cheapest spirits in India

Goa has long been known for its picturesque beaches and vibrant culture. But for many travelers, it’s not just the sun and sand that draw them in, but the allure of affordable liquor. Goa’s unique tax structure has made it a haven for those seeking budget-friendly spirits, setting it apart from its neighboring states, especially Karnataka, which boasts the highest alcohol levies among large markets in the country.

According to an analysis conducted by The International Spirits and Wines Association of India for TOI, a bottle of spirit – encompassing whisky, rum, vodka, and gin – that retails for Rs 100 in Goa can escalate to Rs 134 in Delhi and an astonishing Rs 513 in Karnataka.
While Goa’s tax rates, at 49% of the Maximum Retail Price (MRP), are not the lowest, they pale in comparison to Karnataka’s towering 83% and Maharashtra’s 71%. The price differential takes into account import duties applicable to foreign liquor products, which remain consistent across states. For some time now, foreign liquor manufacturers have been lobbying for a reduction in import duties on wine and spirits, which can go as high as 150%. They are seeking tariff reductions through ongoing free trade negotiations with the UK and the European Union.

The disparity in state taxes has led to significant price variations of over 20% for popular Scotch brands between cities like Delhi and Mumbai. For example, a bottle of Black Label, which costs around Rs 3,100 in Delhi, fetches nearly Rs 4,000 in Mumbai. This stark contrast in taxes also contributes to the smuggling of alcohol across state borders.
Unlike most goods and services, alcohol and petroleum are currently exempt from the Goods and Services Tax (GST), resulting in a patchwork of levies and tax rates throughout the country.

In the absence of the GST’s harmonizing effect, state Finance Ministers often resort to raising taxes on alcohol, petrol, diesel, and property when their own tax revenues take a hit. States that offer various incentives also tend to increase levies on these products, as their revenue primarily depends on the share of GST disbursed by the central government.
While there has been ongoing discussion about bringing petroleum products like petrol and diesel under the GST umbrella, alcohol remains excluded. This also means that consumers have to grapple with the cascading impact of taxes, unlike the GST system, where most goods and services are eligible for input tax credits.

As states gear up for the commencement of the excise cycle next month, the industry is closely monitoring these developments. Goa’s lower liquor taxes continue to be a unique selling point for the state, attracting both tourists and budget-conscious consumers from neighboring regions.

(the above news was originally posted on economictimes)

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