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Friday, Jan 31, 2003

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Tough act today for group on liquor

P.T. Jyothi Datta

NEW DELHI, Jan. 30

IT will be a tightrope walk for the Joint Working Group (JWG) on alcoholic beverages - as it tries to strike a balance between the Centre and States on the issue of revenue-sharing. It has also to cobble an import tariff to recommend to the Union Finance Ministry - a contentious issue that divides the domestic and MNC liquor lobbies.

The JWG group, set up by the Ministry of Food Processing Industries (MoFPI), will in its meeting on Friday take up issues regarding the optimum import tariff, revenue and the collection mechanism, the Ministry top brass told Business Line. "Liquor has been a milch-cow, given that it contributes about Rs 20,000 crore to the Government kitty," point out industry officials.

The meeting will also take up the rationalisation of policies and excise structures between States, towards one comprehensive seamless policy. But, while this is a time-consuming exercise, the discussion on import tariffs and revenue-sharing assume significance - as the JWG's recommendations may well be the basis on which the Finance Ministry would structure its sops for the alcoholic beverages segment in Budget 2003-04.

Budget 2001-02 had reduced basic customs duty from 210 per cent to 182 per cent , as a phased progression towards reducing import duty to the bound rate of 150 per cent by 2004. Further, the three-slab additional duty, imposed in the earlier Budget (2000-01) to provide a level-playing field, was made a two-slab structure last year. Additional duty of 150 per cent, 100 per cent and 75 per cent for spirits priced up to $20, $20-$40 and above $40 per case respectively were replaced by duties of 75 per cent and 50 per cent at price levels of $25 and above.

Against this backdrop, the JWG had in its earlier report suggested changes in the tariff structure, besides administrative changes that would facilitate to fill the State kitty, liquor being a State subject. And to avoid double taxation at the Central and State levels, the report had proposed that additional duties, until now shared, go to the State.

Finance Ministry officials, however, opined that additional duty of customs has to be imposed and collected by the Centre: "It is shared with the states as per the recommendations of the Finance Commission," they point out. However, the grouse of State representatives has been that the collection of additional duty by the Centre "encroached in the already small revenue space of the States."

Further, they point out that "Central duties leave little scope for states to levy more imposts and the amount being passed onto states by the Centre is only partial and is done after a time gap. Besides, the sharing under the Finance Commission formula will not be proportional to the liquor imported/consumed in a state."

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