In order to avoid confusion on account of different excise rates in the liquor industry, national council of applied economic research has suggested a uniform taxation rate on alcoholic beverages across all states.
The study, commissioned by the confederation of indian alcoholic beverage companies has recommended a single-point, specific tax on various alcoholic beverages. while indian-made foreign liquor with 42.8 per cent alcohol content should attract a levy at the rate of rs 150 per bulk litre, country liquor with 35 per cent alcohol content should invite a levy of rs 120 per bulk litre and mild beer with around six per cent alcohol should have a levy of rs 20 a litre, it said.
With respect to inter-state movements, it recommended that the tax revenue be split equally between the producing and the consuming states. different tax rates across states has been a bone of content for a number of years. the liquor industry has been united on this front and has been giving various representation to states to have uniformity in tax rates to avoid confusion and minimise scope of illicit inter-state trade in terms of smuggling, spurious liquor manufacture and leakages of revenue.
Sources said a number of states have shown interest in the proposed tax structure. speaking to et, bacardi-martini india, shobhan roy said the study has taken into account two factors while fixing the entire structure of taxes on alcoholic beverages: the formula must be constant across states to minimise the opportunity for arbitrage; and, a relatively high proportion of the total tax incidence should be based on alcohol content rather than on an ad valorem basis. the study was commissioned by ciabc.
If the recommendations of the ncaer study were accepted then an exclusively alcohol-content-based tax would tend to make the cheaper brands with higher alcohol content more expensive in the states.
He said some degree of progress could be introduced in the new system by introducing a sales tax on the post-excise value of the product. an anticipated inter-state co-ordination effort would have a uniform 20 per cent s-t on alcoholic.
The study viewed the process in the broader fiscal context of deteriorating state finances which had made the state government realised the merits of tax co-ordination.
