ALCOHOL OUTSIDE THE PURVIEW OF GST- EFFECT ON LIQUOR INDUSTRY

INTRODUCTION

First and foremost, GST wouldn't have been in a greater time. As we enter the world economy that is going increasingly protectionist in nature, world business can grow increasingly challenging. Luckily, India's large, relatively young, and diverse population thinks that higher national demand alone will help us sustain higher growth in the economy for the next 10 years or so. This is precisely where GST can improve. The simple, consistent tax plan would make it easier for corporations to transfer goods and services across the nation. This would in turn boost national demand. Higher availability of the variety of goods to more places and the avoidance of large tax would decrease costs for the consumers in the longer run, too.

GST was applied to make much greater advantage but it seems to have much of the disadvantage, and we can see the clear view of how everything in the present day is rising concerning the price to quality.

ALCOHOL OUTSIDE THE PURVIEW OF GST- EFFECT ON LIQUOR INDUSTRY

Liquor Industry is one of the major industries, and it is a fact that it cannot be ignored though if some of the people don't find it good for the health perspective. Everything comes with a darker side of it with the light, and the fact is everything majorly everything has a deeper unacceptable side of it likewise, the disadvantage faced after the implementation of GST and the downgrade lots of business faced by it even it includes the liquor industry.

Alcohol wasn't brought under the purview of GST regime primarily thanks to two reasons:

• To ensure that the State Governments still have a robust inflow of revenue (other than what they get from GST). It’s estimated that taxes on liquor and beer fetch the state governments nearly INR 90,000 crores annually.

• To keep the costs of liquor and beer high to limit consumption.

There is a reason why the industry is fearful. within the days preceding its rollout, the Centre had agreed to stay alcohol and petroleum products out of GST thanks to pressuring from most state governments that trusted tax income from these two categories. While alcohol was kept out as per the constitutional amendment that implemented GST, petroleum was kept outside under the condition that GST will apply thereto at a later date, alcoholic products were kept out, an effort was made to incorporate its raw materials under GST. This ranged from ENA, which accounts for up to 35 per cent of the entire cost, also as glass bottles, transportation and taxes on government services. “(When) raw materials are in GST and outcome is outside, (we would have) ended up paying more taxes as we cannot offset (input credit) with outcome taxes, and costs go up,” points out Singh, who then led the successful lobbying against the anomaly. For bottles, for instance, an agreement was reached that GST is paid the primary time a bottle is employed, and only GST on a residual value is paid when the bottle is re-used.

The liquor industry typically outsources an outsized number of their works - brewing, bottling, packaging, etc - to 3rd parties or job workers. Such works which include processing of staple or performing on the semi-finished goods of a (GST) registered entity by another entity are called job works. the speed at which GST is levied on paperwork services is 12 per cent, barring a couple of exceptions like on food and food products.

Since GST isn't levied on the sale of liquor, alcohol manufacturers find yourself paying GST on inputs but unable to say input decrease. This adds to the value of producing and puts pressure on the capital of the manufacturers.

The other reason for the sharp increase within the cost of liquor is the applicability of GST on transportation and freight charges. Previously, transportation and freight attracted a service tax of around 15%. However, post-GST, they're taxed at 18%. Hence, even with no major changes within the VAT rates charged on beer or liquor, the value of beer and liquor had increased thanks to the rise in input taxes.

• This would mean that if the tax rates were lowered, then people would be fewer likely has led to an increase in the price of alcohol. The higher prices have also caused a decrease in sales of alcoholic beverages. This has resulted in a decline in the quantity of alcohol sold by consumers. This is due to the fact that people are now more aware of their drinking habits and Therefore, they are more willing to pay for alcohol. Therefore, it's important to note that the tax rate will not affect all drinkers. This is because there will be some who may not want to drink alcohol at all. The government should consider the effect of these changes on consumption.

The liquor industry isn’t much supportive of the government’s decision to exempt liquor from the ambit of GST. Exempting liquor from GST has led to an increase within the overall cost thanks to the increased taxes on the inputs. This is often an extended process, which results in the lengthening of the capital cycle.

The government has been trying to reduce the amount of taxes imposed by the state and local governments. They have also tried to raise revenue through tax increases. The government has been doing so for a long time now. However, tax rates are still high.

Most of the liquor manufacturers believe that there’s no point in excluding beer from the purview of GST because the alcohol content by volume is merely 5%. Most of the industry insiders wish that beer is brought under the GST regime this may have an interesting impact on the flourishing tourism industry.