Higher excise duty on country liquor to rake in more revenue

The state government's decision to hike the excise duty on country liquor may lead to an around Rs1,000 crore gain for the exchequer.

In his budget speech on Wednesday, finance minister Sudhir Mungantiwar said that the excise duty rate on country liquor would be changed. Accordingly, the duty will now be 200% of the manufacturing cost or Rs120 per proof litre, whichever is higher. The previous rate was Rs 110 or 250% of the manufacturing cost, whichever is higher.

The duty rates on IMFL, country liquor and beer were last hiked in 2013. Country liquor, which is largely consumed by the masses, sees the highest sales, followed by beer and IMFL.

"The change in the duty structure will help us mop up an additional Rs 300 crore as state excise revenues. The increase in the MRP will also generate an extra Rs 550 to 600 crore towards value added tax. In all, the government may gain around Rs 1,000 crore," said a senior state excise official. He added that the duty rate change would push up retail prices of a 180 ml country liquor bottle from Rs 33 to Rs 45.

However, the duty structure on IMFL and beer has been kept unchanged. In 2013, these rates were revised to Rs 300 per proof litre from Rs 240 per proof litre for IMFL and on strong beer, this was brought to Rs 60 per bulk litre or 200% per cent of the manufacturing cost whichever is higher (from the earlier rate of Rs 42 per bulk litre or 175% of manufacturing cost whichever is higher).

The state excise department has been given a revenue generation target of Rs 13,500 crore for 2015-16 from Rs 11,500 crore in the current fiscal.

Maharashtra follows a policy of discouraging liquor consumption through high prices and low sales and has one of the highest excise duty regimes in India. Country liquor is meant to provide a safe and cheap alternative for drinkers and keep them away from consuming illicit liquor and hooch, which can prove harmful.

The state excise official said the hike would also benefit retailers whose margins would rise and keep them away from charging rates above the MRP. Country liquor follows a 1:2:1.5 duty structure with the figures representing manufacturing cost, excise duty and retailers margin, respectively.

However, due to high duty structures leading to costlier liquor rates in Maharashtra, there are huge incentives for smugglers and bootleggers to smuggle in the brew to Maharashtra from neighboring states and union territories like Goa and Daman which have comparatively liberal policies or for liquor duplicators to market their spurious produce.

In 2013-14, Indian Made Foreign Liquor (IMFL) consumption rose by 7.84% to end at 1,615.06 lakh BL in 2013-14 versus 1,497.62 lakh BL in 2012-13. The sales of beer have however headed south at just 2,986.09 lakh BL in 2013-14 down from 3,169.34 lakh BL in the previous fiscal (-5.78%), while country liquor (CL) too fell to 3,210.97 lakh BL from 3382.99 lakh BL (-5.08%). However, wine consumption rose by 9.71% to end at 50.56 lakh BL from the previous 46.08 lakh BL.