Excise policy 2011-2012 anounced – New Licence Raj?

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The Excise department has done it yet again. It seems the Rs 5 lakh (Rs 500,000) licence fee wasn’t enough of an expense for importers, but the department wants more! Isheeta Gupta comments.


The new licence policy has just been announced for 2011-2012. The licence fees are now Rs 600,000 for the financial/excise year which has to be paid in full, despite the fact that one month has already elapsed. The new 600,000 licence fee allows the licence holder to sell as many brands of “Wine/Beer/Liqueur/ Cider/ Alcopop/Mixed Alcoholic Beverages” but only up to 10 spirits. If you want to sell more spirits, you have to pay an additional Rs 30,000 per brand. On the bright side (if there is one) the policy is more favourable to wine than spirits. Wine is not being clubbed with spirits, which is a good thing.
The charges for label registration are Rs 20,000 per brand of whisky, rum, gin, vodka and brandy and Rs 5,000 per brand of “Beer, Wine, Liqueur, Alcopop/Mixed Alcoholic Beverages and other mild liquors”.
The licence now requires importers to declare a Wholesale Price (WSP) which is CIF plus margins and operating costs (which are huge thanks to complicated procedures). The policy also states that the WSP declared should be lowest in Delhi compared to that of neighbouring states ie, Haryana, Union Territory of Chandigarh, Punjab and Uttar Pradesh. Since Delhi is the state which has the highest taxation and operating costs in India, it seems doubtful that this is possible.
The Excise department seems to be forcing a price increase from the importers for other states to prevent illegal inter-state movement of liquor, as usual failing to comprehend a basic theory of economics; the higher the taxation (over a certain limit which was crossed a long time ago!), the lower the revenue collected.
The Government also plans to initiate an Excise Supply Chain Information Management System for which they will require importers to install their software. Imports will now require an Excise bonded warehouse (in addition to a custom bonded warehouse) which will be controlled by the Excise department. This too will increase operating costs drastically.
Overall, more licences, more permits, more complications, more chai-pani, higher costs and higher prices. The taxation has not been announced yet. I hope this will not come as another rude shock for importers and consumers. After the last few years of excise policy changes, I am quite pessimistic. We are not past the licence raj in India; it was probably never over. When will they realise that the public will not pay a thousand bucks for a one or two euro wine which should have been priced almost at par with domestic wine in the Rs 500 to Rs 600 range?
We can only hope that someday common sense will prevail and they will understand that reasonable taxation will result in higher revenues.

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