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ALCOHOLIC BEVERAGES INDUSTRY UNDER GST REGIME

Goods and Services Tax - GST - By: - Dr. Sanjiv Agarwal - Dated:- 13-1-2017 - Introduction Alcohol sector is the second largest contributor of taxes to state Government exchequers yielding more than ₹ 90, 000 crores in taxes every year. The total tax impact for liquor companies are in the range from 70-150% in most states as no inter-tax set-offs are available for them. While alcoholic beverages represent 25% of the food and beverage market in China and the US, in India, spirits alone is 3 .....

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ustry has been wanting the inclusion of all sectors and products, with limited exceptions and exemptions. Present Tax Scenario According to clause (f) of Section 66D (Negative List) of Finance Act , 1994, w.e.f. 1.7.2012, services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption were in the negative list . Finance Act, 2015 had amended the aforesaid entry (f) w.e.f. 01.06.2015 to carve out from the negative list, .....

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cation No. 25/2012-ST. To give effect to the exclusion of processes in relation to alcoholic liquor from negative list, exemption under Notification No. 25/2012-ST was also amended w.e.f. 01.06.2015 to exclude exemption to intermediate production processes/job works in relation to alcoholic liquor meant for human consumption. Liquor industry is also subject to levy of State VAT and other local taxes as entry tax / octroi etc. Goods and Services Tax (GST) as a tax reform Migrating to Goods and Se .....

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of India has been amended to give effect to GST by the Constitution (101st Amendment) Act, 2016. In article 366, a new definition of 'goods and services tax' has been provided in clause (12A), i.e., 'goods and services tax' means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption. Entry 54 (List II) with respect to alcohol, giving exclusive powers to the States to levy tax on sale of alcohol has also been subst .....

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negative impact. Likely positive GST impact on the alco-beverage industry Better and efficient logistics/distribution channels State taxes other than excise/VAT to be subsumed in GST. To that extent, input tax credit may be allowed. Relief from dual administrative control (only States to control) Likely adverse GST impact on the alco-beverage industry There is no concept of centralized registration in GST regime, unlike in the present setup. Where input goods and services used in the petroleum a .....

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ng and/or production. Cost of production and consumer prices would likely go up which would ultimately impact sales. There are likely to be inefficiencies in production and distribution supply chains as alco beverages will be out of GST net. No encouragement for foreign direct investment (FDI). GST to be paid on various services without allowance of input tax credit on those services. GST will be payable on various regulatory fees (for example, licence fees to State governments). The alco-bevera .....

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e will be adverse impact on major consumers like hotels, restaurants, pharmaceuticals, perfumes manufacturing sector etc. in the form of increased cost. Major Challenges in GST GST poses multifarious challenges to alco-beverages industry. In the GST regime, due to higher GST rates tax on many input raw materials (for instance, agriculture inputs to ethanol production) as well as services, costs would go up significantly which would prove detrimental to the industry in both the short-term and the .....

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T regime, it will not only have negative impact on the state revenues but also makes the end product expensive and thereby drive the consumers to find ways and means to resort to spurious products. Currently, 70% abatement on freight charges is available in case of transport of goods/ passengers by rail, or by goods transportation agency, subject to the condition that CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the serv .....

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