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The International Spirits and Wines Association of India (ISWAI) has urged the State Governments to re-consider their decisions to exclude alcohol from the Goods & Services Tax (GST) regime.
In a letter sent to the State Finance Ministers on Monday, the association has stressed that the Constitution (Amendment) Bill on GST does not affect the current powers of the States to levy taxes on the alcohol sector or regulate it. “The exclusive powers of State Governments to regulate and levy excise duty in terms of Entry 8 and Entry 51 of the State list in the Seventh Schedule to the Constitution remains protected,” the letter States.
While Entry 8 gives exclusive powers to States to legislate in respect of liquor production, manufacturing, possession, transport, purchase and sale, Entry 51, gives powers to States to legislate in respect of duties of excise on alcoholic liquors produced or manufactured in the State, the liquor associations’, letter added.
“We understand that the amended Constitution Bill empowers States to levy tax on sale of alcohol…Power to levy SGST is a supplementary power over and above these other powers. In fact, SGST of 10 per cent on alcohol would mean ₹8,000-10,000 crore of incremental revenue for the States,” the letter pointed out.
The liquor association has also expressed concerns that the current estimates of Revenue Neutral Rate (RNR) at 26-27 per cent are high and if implemented, will impose a huge burden on the consumers and will adversely affect tax compliance.
“High rates would be particularly detrimental to the services sector, which has been the engine of growth for our economy. As a result, GST would run the risk of being a non-starter instead of the ‘game-changer’ that it is expected to be,” the letter stated.
Negative ListThe liquor industry has been maintaining that the alcohol industry should at least be removed from the Negative List under the Constitution, till the State and Central governments arrive at a consensus. They have said that exclusion if considered necessary should be in the GST legislation and not in the Constitution, as it will be difficult to amend it later.
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