TaxTMI 
TaxTMI 
TaxTMI 
Now that we have a duly elected popular Government of Bhartiya Janta Party (BJP) lead National Democratic Alliance (NDA) in place, one can expect tax reforms. The incumbent government has been voted back to the power implying continuity or strengthening of fiscal and economic policies as well as reforms. Thus, it is expected that tax policy and fiscal policies may be reformed further, rationalized and simplified but any major shift or u-turn may not be expected in ordinary course.
With the change in Government at the centre and political changes in many states, it is also expected that composition of all powerful GST Council, highest decision making body for GST, will also undergo a change with ruling Government to gain more control. This would imply ease of decision making process in the GST Council.
Since now the Government will like to leapfrog on the reforms and rationalization of taxes, it is the right time to engage with the law makers, so far as alco-beverages industry is concerned. Already suffering from the over taxation and being a sandwich between old indirect tax regime (VAT, State, Excise) and the Goods and Services Tax (GST), the industry should raise its concerns before GST Council and make out a case for inclusion of alco-beverages (bear, CL and IMFL) into GST net. If that may not be feasible immediately, it may provide for tax rates rationalization on major inputs so that the adverse impact of tax cascading be avoided till the time alco-beverages are taken into the GST ambit.
It may be desirable that all the trade bodies in alco-beverages sector should get their concerns addressed to GST Council and get resolved which may prima facie include inclusion of alco-beverages in GST net itself. This can be done via change in definition of ‘goods’ and change in provision relating to charging section - levy and collection of GST. Also, any possible revenue loss to states (not likely) may be adjusted via compensation cess which is meant for such purposes only. If such a change is not possible, rate of GST on major raw materials and input services may be reduced. Specific exemptions may also be provided to certain services consumed in liquor industry to avoid cascading effect on final output cost.
Infact, GST Council will have to take states on board for inclusion of alco-beverages into GST and may have to work out some formula for compensating the states for possible revenue loss to some States.
There may also be a need to have a tax policy for states which have ‘prohibition’ in their states. In such cases, while revenue loss is already there, compensation could be tweeted in a way that while states continue with prohibition, revenue losses arising are taken care of. Further, input tax credit may be allowed as a special case to alco-beverages industry as a special dispensation till a viable solution is found.
Government should also keep in mind the revenue alco-beverages sector generates for the states. It is a fact that alco-beverages sector is one of the significant contributors of tax revenue to state exchequer, besides also contributing to Union in the form of income tax and other central taxes. If there exists a strong political will, it may not be that tough for the centre to even make amendments in the Constitution to levy GST on alco-beverages.
GST law is still a work in progress. Alco-beverage sector is one of the major industry which has been deliberately ignored in GST regime due to political and constitutional reason. It may be desirable for the trade body (ies) to appropriately represent before the GST Council, which generally lends its ears to taxpayers.