Liquor associations warn against proposed tax hikes in West Bengal

The alcoholic beverage industry has urged Chief Minister Mamata Banerjee not to go ahead with the proposed excise policy as it will lead to a “steep” hike in liquor prices, killing the industry, leaving thousands of people jobless and hurting the government’s tax collections.

In a joint representation to the chief minister, two liquor associations – Confederation of Indian Alcoholic Beverage Companies (CIABC) and International Spirits and Wines Association of India (ISWAI) – said, “It is well known that the alcoholic beverage industry is facing an acute fall in sales volumes in West Bengal. Sales were down significantly because of the additional levy of 30% VAT which was imposed after the Covid-19 pandemic broke out, consequently leading to a fall in tax revenues for the government.”

The representation said there had been a sharp drop of 58 per cent in sales volumes across segments after the tax was imposed in April 2020 and the alcobev trade resumed in May 2020.

“If a 30% increase in consumer prices brought on by the imposition of VAT could bring sales down as shown above, it is frightening to envisage what a further hike in taxes on spirits will do to liquor sales in the state and consequently to the government’s tax collections,” it added.

Under the proposed policy, consumer prices of fast-moving brands will go up by 40-90% (translating to Rs 150 to Rs 450 per bottle), as a consequence of the changes in taxation and in trade margins, the bodies said.

CIABC Director General Vinod Giri said, “Excise policy proposed by the West Bengal Excise department on August 19 has created great concerns amongst companies. Industry fears that this policy will create undue disruptions and even possible job losses just before the peak Puja times. The proposed policy also uses a deeply flawed concept of inter-state price comparisons because the operating conditions vary considerably across states.”

He pointed out that consumer price differences between West Bengal and the neighboring states, which were already high after the imposition of VAT in April this year, would go up even further if the policy wasimplemented.

State borders, not just in the east, but all across the country, tend to be porous and such high price differences will just incentivize cross-border smuggling of alcohol, most of it illicit, and even spurious. Further, such high consumer prices in the state will give rise to illegal and spurious manufacturers in West Bengal or neighbouring states, Giri said. 

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