TOO MUCH REGULATION IN ALCO-BEVERAGES INDUSTRY

The alco-beverage industry continues to be over 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, next to petroleum products.

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

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).

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.