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Excise on low-end liquor hikes in Bengal
November, 16th 2010

On the very day that the 1% VAT on luxury items came into effect, the cash-strapped Bengal government announced an ad-valorem 5-10% hike in excise duty on low-end liquor on Monday.

The hike is part of a series of "reforms" announced to raise the crisis-ridden government's earnings. But it came as a shock to dealers and consumers alike because the segment that has been targeted happens to contribute nearly 70% of the total liquor sales.

The government has also decided to allow the sale of low-end liquor, which has an MRP of Rs 260 or less, in country liquor on-shops. This will not only raise revenue earning but also help draw away consumers from illicit and spurious liquor which is often sold in country spirit outlets. What's more, the government has scrapped the privilege area' clause that allowed manufacturers to sell products in particular areas around their units. This was proposed by finance minister Asim Dasgupta at the state budget but was implemented on Monday.

The excise department has withheld permission for more off-shops in the state. The duty imposition is in keeping with the government's policy but is unlikely to affect sales, say sources. Liquor has been the most productive segment of revenue for the government over the last three years.

Now, when it faces its biggest financial crisis in 34 years, the Left Front government has fallen back on it yet again. "This is the most lucrative segment so far as sales are concerned. It will generate substantial additional revenue," said an excise official.

Wholesalers pressed the panic button, saying supplies were running out. There was confusion over the pricing of old stock. Soon after the announcement, manufacturers withheld supply. "There could be a crisis from Tuesday for off-shops can't store a big volume. They are already running out of stock," said Parag Mitra, vice-president of the Foreign Liquor Manufacturers, Wholesalers and Bonders Association. He added that low-end whisky, rum, vodka and liqueur were going to be affected. "It is surprising that the excise department said nothing on old stock. This has led to a confusion among manufacturers. They need time to revise the price and change the labels," said Mitra. Changing of labels requires the sanction of the excise commissioner.

Restaurants, however, have decided not to revise their price list immediately. "We shall wait for at least a month till the manufacturers come up with a price revision. Till then, prices will remain unaltered," said Pratap Daryanani, owner of Oasis restaurant on Park Street.

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