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Karnataka Wine Policy Finally Notified

After four months of dilly-dallying, the Karnataka government has finally notified the announced wine policy making minor amendments, which will make the imported wines more expensive by about Rs. 280 ($6)

The provision of permitting wineries to sell wine at their wineries has also been removed.

Wines imported from overseas will have to pay an additional excise duty of Rs. 300 per bulk liter, being referred to as 'Additional Special Fee'.  This translates to Rs. 225 a bottle. Add to it the profit margins of wholesalers and retailers and VAT and the net effect are expected to be about Rs. 280 additional.

Wines produced in India outside Karnataka will apparently also pay Rs. 300 per bulk liter towards Import Fee. This means that barring Grover Vineyards and Humpy, the two wine producers in the state, all other Maharashtra wines should become expensive by this amount.

Sparkling Wines including Champagne are not being clubbed with 'Fortified Wine' in being denied any benefits of the Wine Policy. Since Fortified wines are being defined as wine with strength of 24% volume or more alcohol, Sherry, Madeira and Port fortified wines which normally contain an alcohol of 17- 24%, will also not be penalised as fortified wines.

By this Notification, the label registration fees for wines (excluding fortified wines) produced within Karnataka will be Rs 1000 per label whereas wines from outside the state will have to pay Rs. 10,000 per label. Till now, Indian wines produced outside

Karnataka had to pay Rs. 25,000 per label and wines within Karnataka Rs. 10,000 per label.

Licences for bottling wine will now be issued for Rs. 1,000 only whereas it used to cost Rs. 25,000 earlier.

Deputy Commissioners can also issue licences for operating Wine Taverns at a fee of Rs. 1,000 pa with an additional security deposit of Rs. 1000 only. The can also issue the day licence for sale or consumption of wine for Rs. 1,000. Earlier this was Rs. 10,000 per day and practically very difficult to get.

The individuals are now permitted to stock upto 9 liters of wine and 4.5 litres of Fortified Wine without needing to secure a license.

While consumers in Bangalore are naturally not happy with the price going up on wines, 'There may be a differences in how they treat domestic wines produced outside Karnataka and imported from overseas', says Alok Chandra, a wine consultant and journalist. Clarifications are now being sought on some points of notification.

Whereas a few of the provisions would need clarifications, the additional duty on imported wines is sure to add fuel to the fire for the recent EU complaint to WTO wherein they have complained that states are unfairly charging additional duties on wines. Incidentally, there is apparently no mention of any 'Additional Special Fee' being imposed on imported beer or spirits.

At the filing of the case by EU, only Maharashtra and Goa to some extent had increased the excise duties after the Additional Customs Duty was waived off in July 2007 under pressure from the WTO. Although India had subsequently won the case (which is under appeal by the US), the point of these additional duties had not been an issue in that case as these were imposed, subsequent to the filing of the complaint.

The additional duties now notified will give further ammunition to EU towards their complaint.

Under Section 147 of the constitution, the states have the right to follow their own policy for marketing or controlling the sale of wine and spirits including the tax policies.

 

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