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VAT squeeze dries up liquor stocks

The festive season may be round the corner, but residents of Ranchi and Jamshedpur face the very real threat of being deprived of their favourite tipple when the good times begin to roll.

Liquor shops in the capital and the steel city are running out of stock and if retailers are to be believed, if there is no supply in the next few days, there will be nothing left to sell, or drink.

The parched state of affairs is being blamed on choked supply. Unsure of the direction to take after the state government hiked VAT on maximum retail price of liquor, manufacturers have reacted by halting supply to retail outlets.

“The producers are in a fix over the rates after the October 3 notification. With no supply for the last seven days, I am left with very little stock,” said Arun Chawla, a retailer with an outlet near Ranchi’s Main Road overbridge.

The seriousness of the situation could be gauged from the reaction of a retailer in Jamshedpur’s Bistupur. According to him, if supply remained low for much longer, he would not hesitate to procure liquor from neighbouring Odisha and Bengal to keep customers happy.

Another Bistupur outlet owner, Raghuvendra Kumar, said though he had enough stock at the moment, he had received only three cases of IMFL and beers so far, against the quota of 50 each for the month.

The October 3 notification said instead of 50 per cent VAT on ex-distillery price, the commercial taxes department would henceforth levy 50 per cent VAT on MRP.

“We can’t decide whether to supply liquor at the new rate or the old rate. If we continue to supply at the existing rate and the state government says it will collect VAT on the new rate from the producers, where will we get the money from?” asked an executive of UB Group, which commands nearly 70 per cent of the market share in the capital.

Suppliers and wholesalers argued that the new VAT system will double the rates of all liquor products. Hence, they wanted the excise department to clarify whether they should supply products to retailers at the new rate or the old rate.

“As soon as the excise department gives us the clarification, liquor supply to retailers will resume,” said Seagram wholesaler Sunil Singh. While some claimed that supply stopped on October 4, sources said supply did take place till October 5 morning.

Each retailer has to pay Rs 3.5 lakh per month to the excise department against its licence to sell liquor. According to norms, each has to sell at least 300 cases (each case containing a dozen bottles) of liquor and another 300 cases of beer every month. If a retailer fails to achieve the target, they are then labelled defaulter.

“One default translates to a fine of Rs 10,000. If a retailer defaults thrice, he is blacklisted. Now, if supply does not resume soon, not only will the consumer suffer, but even the retailer runs the risk of being fined,” said an outlet owner.

A delegation of liquor producers, wholesalers and retailers called on excise minister Gopal Krishna Patar and department secretary Satendra Singh on Wednesday.

Patar said he had written to both chief minister Arjun Munda and deputy chief minister Hemant Soren, who was in-charge of the commercial taxes department, on the issue of the notification.

“We will soon find a solution. As of now, suppliers should supply liquor to the retailers at the present rate and not worry about enhanced VAT,” said Patar.