E-Malt.com News article: India: Beer makers to intensify lobbying for tax structure rationalisation

India beer makers have decided to intensify their lobbying for rationalisation of tax structure with the governments of major states across the country. To begin with, they have approached the Andhra Pradesh (AP) excise minister and apprised him of the need to tax the beverage based on the alcohol content and not to club it with spirits (hard liquor), Business Standard reported on November 16.

"We have started with AP as we came to know that the state government is on the verge of framing a new excise policy. We will take up this issue from now onwards with all the major states in the country by March 2015, before the commencement of the next financial year," All India Breweries Association (AIBA) director general, Shobhan Roy, said.

Besides tax rationalisation, the AIBA is also seeking issue of separate licences for sale of beer so that exclusive beer retail shops and consumption outlets can be established.

Roy said beer in India was taxed more than the spirits due to lack of understanding of the negative consequences of excessive consumption hard liquor. Policies in this regard were "fueled by greed not understanding".

According to Roy, most of the countries outside India recognise the benefits in taxing high alcohol content and lower alcohol content drinks like beer differently. In France, taxation on spirits is five time higher and in Germany six times higher than beer. The reason for this is that hard liquor has greater negative consequences for public health than beer.

He said the tax differential was also due to beer being more socially acceptable beverage and more expensive to produce compared with spirits. Beer has alcohol content ranging from 5-8 per cent while Indian Made Foreign Liquor (IMFL) has an alcohol content of 42.5 per cent

On the alcohol content basis, Roy said, beer is more expensive than spirits in India. Except in Kerala, the price of a 180 ml IMFL is lower than the price of a bottle of beer. Since taxation is a state subject, the tax rates differ from state to state ranging from 25 per cent to 65 per cent. Thus, "driving new and existing drinkers to hard liquor".

The AIBA, which represents the interests of the brewing industry in the country, stated the beer industry in India was valued at Rs 24,000 crore in 2013 and had contributed more than Rs 15,000 crore to the exchequer of states. The industry has 89 breweries across the country.

The industry's annual growth rate, which stood at 12 per cent between 2004 and 2013, declined to 3.3 per cent in 2013-14 and to 3 per cent so far this year.

"Poor policy" has resulted in shrinking of beer volumes and increase of hard liquor consumption, Roy said.


21 November, 2014