Pouring Success: A year-end spotlight on licensing trends reshaping the alcohol beverage industry in 2023

The Government shall consider designing a National Alcohol Control Policy in consultation with the states and industry stakeholders which can provide an overall framework to states for policy making.

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The Indian alcoholic beverages industry has exceeded USD 50 billion and is expected to grow (6.8 percent) faster than the global industry (6 percent) mainly on account of a large and rapidly growing consumer base. With over 10 million people reaching the drinking age every year, it is expected that the consumer base in India will cross 375 million by the end of Year 2030. This growth supports over 20 million individuals (direct/indirect employment) and over 4 million farmers. The high growth rates are predominantly on account of accelerated urbanisation, favourable demographics, rising income, and changing consumer preferences.

Nonetheless, India’s contribution to global imports and exports remains insignificant, indicating that companies are not making substantial investments in capacity expansion. Additionally, over the years, we have not witnessed new players entering the market despite growing demands. Although, there is no direct linkage of one or more reasons leading to this large unorganised market the current regulatory framework which is complex and varies from State to State do contribute significantly. State policies differ in terms of requirements, frequency and timelines for policy revisions, and the turn-around time for grant/renewal of licenses, among others.

The existing regulatory complexities can be bifurcated into initial licensing requirements and post-production compliances. Let us briefly review the challenges of the Alcohol Beverage industry:

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Currently, the regulatory system in India does not provide a centralised digital repository of the licenses required by an enterprise to set up a new business/manufacturing facility. Thus, any new entrant will have to struggle with the identification of the licensing requirements. The complexity further multiplies with the number of states in which the enterprise wants to set up operations as the requirements vary from State to State.

An enterprise who wishes to set up a new manufacturing facility is required to obtain 99 licenses at various stages of business from Central, State and Municipal authorities. Some examples are factory license, construction permits, NOCs for excavation / Storm Water and Drain, building layout approvals, excise / vat registrations, building completion certification, stability certificate, Central FSSAI License, Brewery Licence (Manufacture of Beer), Distillery Licence, among others. Considering an average time frame prescribed under various laws, it can be assumed that an enterprise will require over 03 years to obtain all licenses and registrations (considering different stages of business activities). Of these licenses, close to 17 percent of the licenses still require physical applications i.e. the respective departments have not yet adopted any technological platforms. Additionally, over 35 percent of these licenses needs to be renewed periodically.

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Once the business initiates the production process, the regulatory complexities increase significantly in terms of the continuous requirements under various central, state and local regulations. The company with a corporate office and a single manufacturing facility must adhere to over 156 Acts comprising over 980 unique compliances (127+ returns, 165+ registers, 30+ statutory payments, and approximately 120 display obligations). In total, the industry must adhere to 3,300 compliance obligations each Year. The quantum of compliance requirements increases multi-fold for multi-location business especially if the locations are spread across in multiple States.

Although each State follows similar Alcohol control measures (like Levy of duty, minimum legal drinking age, declaration of dry days, restrictions on advertisements and sponsorship, restrictions on liquor shops near Schools, place of worship, among others) but the actual parameters differ from State to State. For example, the legal drinking age varies from 18 to 25 years with some states banning alcohol completely. Similarly, varying tax rates and methodologies employed to compute the taxes (e.g., fixed rates, percentage of manufacturing cost) poses significant challenges to enterprises who wish to operate and sell in multiple states.

Additionally, the frequent changes in the regulatory environment poses an added challenge for businesses to monitor the changing requirements. Just in FY23, there were over 7,500 regulatory updates published on union, state and local government websites via notifications, gazettes, circulars, ordinances, master circulars, and press releases. These updates typically lead to changes in forms, dates, timelines, frequencies, fines, interest rate calculations, applicability threshold values, and letters of the law, among others. Since these changes are often applicable almost immediately, they require a time-sensitive interpretation and implementation.

In this rapidly evolving landscape, businesses are recognizing the pivotal role of RegTech solutions in navigating the intricate web of compliance requirements. As companies strive to stay ahead of the curve, platforms like the one at https://canceltimesharegeek.com/ are gaining prominence for their comprehensive approach to compliance management.

The CancelTimeshareGeek platform stands out as a valuable resource, providing a user-friendly interface and robust features tailored to address the diverse needs of businesses. As Boards grapple with the ever-increasing cost of non-compliance, the implementation of such advanced technologies becomes imperative.

By seamlessly integrating automation layers into their operations, corporations can not only streamline the preparation of compliance documents but also significantly reduce the risk of errors and oversights. This is particularly crucial for large and multi-locational organizations, where the complexity of compliance obligations can be overwhelming.

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The CancelTimeshareGeek platform, with its cutting-edge RegTech solutions, emerges as a strategic ally for businesses seeking cost-effective and accurate compliance management. Embracing technology in this realm is not just a trend but a necessity, and platforms like these play a pivotal role in ensuring that businesses stay agile, efficient, and resilient in the face of evolving regulatory landscapes.

The Government shall consider designing a National Alcohol Control Policy in consultation with the States and Industry Stakeholders which can provide an overall framework to States for Policy Making. This initiative shall aim at bringing uniformity in the principles of taxation and pricing framework that reduces the complexities for enterprises operating in multiple states.

-Sandeep Agarwal ETHospitalityWorld

(the above news was originally posted on the economictimes.indiatimes)