The alco-beverage industry continues to be excessively regulated in India, even after over 70 years of independence. Such over regulation is not just in manufacture but also in sales and consumption.

While we have no national economic policy on the same, simply because alco-beverage is state regulated, every state has its liquor or state excise policy and its distribution is regulated through state owned corporations for marketing, excise levy, liquor license and consumption etc. During Covid pandemic, the states enhanced the taxes heavily to earn more revenue, providing pain for buyers as well as all those who are associated with alco-beverage industry.

The distribution of alcohol is highly regulated through licensed shops, permits to clubs, restaurants, hotels and others (pubs, bars etc), not like any other commodity. This sector also provides a major source of revenue to states, only next to petroleum products.

There should be relaxed norms to store alco-beverages at home with a reasonable limit of all varieties. Such limit could be per house or per adult individual. Home delivery may also be facilitated. Further, for consumption at private parties, other than at licensed premises, norms ought to be relaxed, subject to reasonable checks and balances.

Today, liquor industry has many pain points, viz,

  • Gap between demand and supply
  • Lack of adequate shops
  • Uneven locational comfort for buyers
  • Huge crowd at shops
  • Sale of non-registered brands and illicit liquor
  • High taxation
  • Uncomfortable access to fairer gender
  • Inadequate foreign liquor
  • Limited licenses (new license ought to open up)
  • Conservative age for consumption of liquor (you can vote @ 18 but not drink) , leading to violations)
  • Still a social taboo

With the changing times, consumption of alcohol is no more gender specific with fairer sex too consuming liquor openly. For this, it is desirable to have better shops, safe environment and make women feel to buy booze. This calls for shops with proper location, illumination, proper and trained staff so that women customers do feel dignified and comfortable. If required, necessary changes in excise policy of states must be undertaken.

Should Government be in this business is also a debatable issue. Should they own and run shops ? Should they only license and regulate? The excise policy and States should confine their role in regulating, taxing and framing policy norms for liquor trade. However, it should be ensured that law, polices and rules are adhered to and complied with. Government may consider reducing its presence or exiting from retail distribution paving way for private players, equitable distribution and enhancing of retail experience of customers. Regulation and participation at the same time is in contrast and also against principles of good governance.

Apart from restrictions on production and putting curbs on consumption (by way of high taxes, licenses, age etc), there is a need to relax the norms to make supply more free and consumption open, say like in case of smoking with statutory warming. This will help alco-beverage industry grow and contribute in a more tangible way towards growth of all stakeholders of alco-beverage industry and contribute more to exchequer in form of taxes (State Excise Duty and VAT).

While it is acknowledged that state excise duty constitutes a major chunk in total revenue, both in terms of absolute numbers as well as percentage of total revenue, the regulation should also lead to quality in distribution and happy retail experience, UP, Maharashtra and Tamil Nadu lead the pack in terms of revenue whereas Himachal Pradesh, Delhi and Uttarakhand are laggards.

Goods and Service Tax (GST) is presently not levied on alco-beverages as it is out of the ambit of Union Government and is subject to only State taxes. Though there is a strong case for bringing alco-beverages into net of GST which will be a win-win for both industry and Government, the concern is only political in terms of state’s fear of being robbed of taxing powers. But like any other goods and service, alco-beverages can come under GST ambit. Some methodology can be worked out by GST Council on which states may agree.

Even today with GST not being levied on alco-beverages, states as well as centre benefits indirectly as VAT and State excise, both are non-cenvatable and allows states to retain input taxes. Similarly, on various inputs and services, where GST is levied, no Input Tax Credit (ITC) is allowable and input taxes are retained.

The need is to revisit liquor, excise and tax policies by State Governments and make it more friendly to all stakeholders. If not, this sector will continue to suffer from buyers bad experience, violations of norms and tax poor tax revenue. All Governments should make a 360 degree review of policies from procurement to production to retail distribution as liquor business is in dire need for an overhaul or detox.

Author Bio

Qualification: CA in Practice
Company: Agarwal Sanjiv & Company
Location: Jaipur, Rajasthan, IN
Member Since: 03 Oct 2019 | Total Posts: 340

My Published Posts

More Under Goods and Services Tax

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

April 2021
M T W T F S S
 1234
567891011
12131415161718
19202122232425
2627282930