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Saturday, Mar 01, 2003

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That Black Label may cost you less!

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IN Mumbai, the consumers may shell out Rs 750 less for a quart of Johnnie Walker Black Label. This, if you like, is indeed the highlight of the Finance Minister's budgetary proposals for the alcoholic beverage sector.

The premium bottled-in-origin (BIO) spirits will cost less following Mr Jaswant Singh's decision to slash additional duty on products priced above $40 per case of nine litres (12 bottles of 750 ml each). The Minister has halved the additional duty to 25 per cent besides bringing down the basic import duty to 166 per cent from 182 per cent. This is expected to reduce the cumulative tax burden on spirits costing $41 per case to 306 per cent from the current 340 per cent.

Similarly, the tax incidence on imported spirits priced at $50 per case and $100 per case will be lower at 283 per cent and 246 per cent respectively.

Initial estimates suggest that the retail consumer price of Black Label, a premium Scotch whisky from United Distillers & Vintners (UDV), could come down by 20 per cent. At present, the brand retails at roughly Rs 3,750 for a quart in Mumbai. There could be a drop in the case of other competing premium labels such as Chivas Regal from Seagram or Jack Daniel's from Brown Forman.

The Finance Minister has attempted a balancing act as far as additional duties on imported liquor go. He has heeded the demand of multinational companies to lessen the tax incidence on premium offerings which would not necessarily compete with the higher-end of Indian Made Foreign Liquor (IMFL) market. In fact, the foreign distillers were also seen pushing for a compromise formula which argued for soft taxation on premium products while going harsh on cheap imports that may threaten certain segments of the local liquor industry.

The Budget has done just that. With the basic duty lowered to 166 per cent, the Finance Minister has also rationalised the additional duty structure under four slabs. Imports priced below $10 per case will carry an additional duty of 150 per cent, while those priced between $10 and $20 will attract 100 per cent. The additional duty for products priced between $20 and $40 is pegged at 50 per cent, and finally, for imports priced above $40, it is 25 per cent.

Mr Anant Iyer, Vice-President, UB Spirits Division, said the Government has continued with the additional duty regime to provide a level playing field for the local distillers.

Mr Amrit Kiran Singh, Area Director of Brown Forman, said the move to reduce additional duty on imports was a decision in the right direction. However, he expressed disappointment at the Centre's decision to continue with additional duties "which is WTO-incompatible". Mr Dinesh Jain, Managing Director (India) of Highland Distillers, said the move to stay with additional duties indicated "protectionism that is unwarranted".

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