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Delhi Raises Excise Duty on Wines

After holding out for a year without putting into effect the proposed and approved excise duty increase, the Delhi Government announced today that the duty was being increased and it would be based on the Maximum Retail Price of the wines as was passed by the Delhi cabinet last year, writes Subhash Arora

While the licensee will be allowed to declare as much MRP as he wishes, the duty on the wine will be chargeable as 30% of the declared max. retail price, if it is under Rs. 2,000. For the higher retail prices, the duty chargeable will be Rs.600+ 20% of the MRP more than Rs.2000.

Theoretically, it means no change in the wines selling for Rs.500 MRP. There are practically no imported wines selling at this price, however. Currently, the duty is fixed at Rs.150 a bottle, irrespective of the price. It is practically impossible to sell such wines at such a low price. For a wine retailing for Rs.1200, the excise will increase from Rs. 150 to Rs.360- a jump of Rs.210. For a wine currently retailing for Rs.3000, however, the excise duty will jump from Rs. 150 to Rs.800, an increase of Rs.650 a bottle. The hotels will be affected equally too.

The sales will be impacted negatively, as the increase is across the board-for retail, clubs, hotels and restaurants-whether paying customs duty or not.

The increase is sure to irk the EU members who will undoubtedly increase their pressure on WTO to take action against India . The increase comes at a time when the importers and hoteliers are feeling the pinch of recession and severe drop in hotel occupancy rates.

There will be no change in the policy towards sales to embassies and duty free shops. The government has announced explicitly the tough measures against misuse and those responsible for leakage due to diversion of stocks with the threat of immediate arrest without bail for breaking the law.

The notification dated 4 June, 2009 is due for Gazette Notification and supposedly comes into force at once, according to the circular which was reportedly released today. The change is incorporated under the Delhi Liquor License (Second Amendment) Rules, 2009.

There is no announcement regarding the expected decrease in the license fee to open a wine bar-presumably, one has to shell out the same amount of Rs.500,000 even if there is no sale of hard liquor proposed in these outlets. Maharashtra has a special policy of allowing wine bars for a license fee as low as Rs.5000 for cities outside Mumbai.

With no change in Haryana's liberal excise policy, the leakage across the Delhi border is bound to increase with importers and distributors having a field day selling more wine outside Delhi , although legally speaking, only one sealed bottle can be taken across the border.

The rule should also help increase sales at the duty free shops at the airport, provided more labels are introduced and storage is improved.

Subhash Arora
June 8, 2009

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