Hic Hic Hurray
While the world has suddenly realized that its ship is on the rocks and businesses all over are nonplussed, the supply chains are short-circuited and lives disrupted, it is the Government that is willing to play the exorcist and free the spirits and release the airports from their Terminal hangover.
It was no wonder then, that when the lockdown relaxations were considered, amongst the first outpourings were the ones for liquor vends.
The government must collect revenue in the wake of all other businesses completely demolished.
Excise duty is a form of indirect tax that is levied by the Central Government of India for the production, sale, or license of certain goods. State governments for alcohol and narcotics also collect excise duty charges. It has as an exclusion mandated by constitutional provision, survived the GST regime that kicked in on 1 July 2017.
The Excise Duty Act, 1944 governs the regulations related to excise duty in India and the tax is administered by the Central Board of Excise and Customs. Its beneficiaries remain both the states and the centre.
The facts are:
Liquor contributes a considerable amount to the exchequers of all states other than for 4 and all UTs other than for Lakshadweep.
States levy excise duty on manufacture and sale of liquor. States also charge special fees on imported foreign liquor, transport fee, and label & brand registration charges. Besides, a substantial amount comes from licenses, fines and confiscation of alcohol products.
Some states, for example, Tamil Nadu, also impose VAT (value-added tax). While a few states, such as UP, have imposed a “special duty on liquor” to collect funds for special purposes, such as maintenance of stray cattle, essentially the Holy Cow.
A report published by the RBI last year shows that state excise duty on alcohol accounts for around 10-15 per cent of Own Tax Revenue of a majority of states.
In fact, the state excise duty on liquor is the second or third largest contributor to the category State’s Own Tax revenue; sales tax (now GST) is the largest.
Now!! The mother of all disruption in the form of Covid-19 is here.
It is clear what got us here wont get us there. Neither the people, nor the old processes!
Whilst all business processes will need to undergo a complete re engineering exercise. It is not the time to brood; rather the distillate would need to be brewed faster to ensure that the industry and the states survive this holocaust and arrive back in good spirits.
Liquor might not sort all the problems, but it is a worthy shot. (pun intended)
I flag two issues:
1. The Industry’s challenges such as, pertaining to GST on the input raw material and its applicability on transportation and freight charges and the long and arduous process of claiming the input tax credit and the complexity of licensing itself has met with a brick walled response from the Government so far. Rightly so! None had the time to lift their heads like now.
2. The government issues several licenses ranging from L-1 to L-30, FL-4, P-10, P-13 etc. If all that is not complex enough, furthermore; since alcohol is a subject matter of the State under the 7 Schedule of the Indian Constitution, thus, the law governing the sale and consumption of alcohol varies from State to State.
Just a case in point is the label that needs to be registered in each state.
This is much like the story of Einstein’s pet cat that could enter his laboratory while he was at work through a single flip-flop door in the wall. The cat had indiscretions of her own and one day gave birth to 6 kittens. Einstein with all his genius put 6 other holes in the wall; each with its own flip-flop door. He remains even today beyond question or fault for not allowing the 6 other kittens to enter through the same door as the mother. Someone in the Govt will understand this.
If analogy can be called the core of cognition, then as per the Old Testament, in the ancient city in the land of Shinar in Babylon, what is today’s Iraq, a building of a Tower of Babel intended to reach heaven was begun and then appeared Jehovah who created confusion of the language of the masons; the people. None understood another and that dissonance never allowed that tower to be completed.
This brings the Government to the same questions; only the government will need to design a newer set of answers. This is the best time to do so!
Perhaps this is the time to rewire the entire harness rather than repair the short circuit.
Social distancing both at workplace and social spots in the wake of Covid-19 may actually turn out to be the new normal. What if another Virus were to arrive sooner than the vaccine.
Production, Distribution and Consumption are the three pillars of Alcohol Industry. If these can be wired to feed a central data base more like it is done for the CBS ( central banking system) that recognizes and authorizes or declines the transaction at any ATM terminal. All these three as much as they might stay traditional, will need to develop newer operating procedures.
The following 3 points may bring some semblance of order to this
1. A review of the 7th Schedule of the constitution that makes alcohol a subject matter of the state. This needs to be centralized to enable the industry to cut through the chase. To bring uniformity and standardization in its production, distribution and consumption is an imperative now.
2. Linking Adhaar to sale of liquor to conform to Article 47 of the Indian constitution that directs the state to remain conscious of the public health care in its view of allowing or prohibiting sale of liquor.
3. Make the distribution DTH ( Direct to Home) through mail orders etc and that may be a good way for the producers to reach the customer direct and cut through the distribution cartels.
An analogy to help our understanding of the DTH is Gutenberg’s invention of the printing press changed the way the world looked at the church, the high priest and the bible. Simply because the bible reached home and with it also came home, the Christ and the Gospel and the Old Monk ever since!
The act of discovery does not lie in looking for new lands alone; it lies in looking with new eyes.
So, what got us here wont get us there. This is the time to take the lead in helping the Govt design a new policy.
Says the bard, in The Merry wives of Windsor, “Come, gentlemen, I hope we shall drink down all unkindness”
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