Shakeup in liquor duty - Bengal budget scraps annual & additional licence fees, proposes single-point collection

Chief minister Buddhadeb Bhattacharjee and finance minister Asim Dasgupta before presenting the state budget in Calcutta on Monday. Picture by Pradip Sanyal

Calcutta, March 21: Foreign liquor may burn a bigger hole in the consumers? pockets in Bengal.

In the state budget today, finance minister Asim Dasgupta proposed simplification of duty collection for foreign liquor. He proposed a single-point collection of duty and abolition of annual and additional licence fees. The excise duty would be increased suitably and would be collected at the warehouse.

At present, the excise duty is collected at the warehouse before the liquor goes to retail outlets, whereas the annual and additional licence fees are collected at the outlets.

This poses a problem in collection on the same liquor at different points and makes it susceptible to leakage of revenue.

The budget proposal will simplify the procedure of collection and also prevent leakage of revenue. This is expected to yield an additional revenue of Rs 100 crore in the next financial year.

However, distributors and retailers feel that though this move will add to the revenue of the state government and make duty collection simplified, it may result in the consumers paying a higher price for the liquor.

?The increase in the excise duty will be made suitably to compensate for the litreage and lump fees and should not have any impact on the retail price of liquor. However, many of us used to provide some discount on the retail price, which may stop now,? said a retailer.

Industry sources said in contrast to the earlier structure, whereby retailers had to pay tax on sale basis, under the current scheme, it will be transferred to a cash-and-carry system, whereby they will have to pay tax before the sale of the bottles. This means an increase in the cost of carrying inventory, which in turn will put pressure on margins. As a result, the discount offered by them may be withdrawn.

Another impact may be that retailers will now be keen on stocking fast-moving brands and may reduce stocking fringe and less popular brands, the reason again being the increased cost of carrying inventory.

Under the current structure, the additional licence or litreage fees on foreign whisky, gin and vodka with 0.75 proof (measure of strength) is Rs 30 per bulk litre for off shops and Rs 35 per bulk litre for on shops.

The advanced annual or lump fee for the same is Rs 1.5 per bulk litre, while the excise duty is Rs 143 per London proof litre (LPL). The excise duty for rum with 0.75 proof is Rs 110 per LPL.

Again, the excise duty for 0.5 proof rum is Rs 60 per LPL and for India-made wine, it is Rs 71.5 per LPL.

For beer, the additional licence fee is 5 paise per bulk litre off shop and Rs 1.5 per bulk litre on shop, which remains same irrespective of the strength of the beer.

However, for beer with strength of up to 5 per cent, the current excise duty is Rs 11 per bulk litre and above 5 per cent, it is Rs 15.4 per bulk litre.