A recent missive of state-run Odisha State Beverage Corporation (OSBC) demanding recovery of excess margins earned by Indian Made Foreign Liquor (IMFL) and Beer retailers because of erroneous calculation of maximum retail prices (MRP) of different liquor products between April 2010 and March, 2013, has drawn ire of the liquor vendors in the state.
They have threatened to surrender their vending licenses en masse and not go for renewal of the licenses, if the excise department insists on refund of the money by 31, March, 2015.
If the retailers go ahead with their agitation programme, the state is likely to lose Rs 5 crore per day as excise revenue. The state government has set a target to collect Rs 2,200 crore from the excise duty in 2015-16. There are about 1,800 liquor retailers in the states including the bars.
The OSBC move comes on the wake of observation made by the Comptroller and Auditor General (CAG) that inappropriate determination of MRP of IMFL and Beer has led to undue benefit to retailers to the tune of Rs 75.01 crore during 2010-13 with the burden being passed on to the consumers.
The auditors observed that during 2010-13, OSBC sold 4.53 lakh cases of beer and IMFL and collected Rs 62.51 crore as tax collected at source (TCS) from retailers at the time of sale and deposited it with income tax authorities.
The retailers obtained certificates towards TCS from the company to avail credit against assessment of their income tax liability and also recovered the same from consumers MRP, CAG said in its report.
The CAG had stated that TCS being a direct tax under provisions of Income Tax Act, 1961 should have been collected separately from retailers instead of being a part of MRP.
Due to inclusion of TCS in the determination of MRP, the burden of income tax of retailers was passed on to consumers. Further, inclusion of TCS component in issue price inflated retailers' margin by Rs 12.50 crore, which was also a burden to consumers.
The consideration of TCS as a cost component for retailers and allowing retailers' margin on TCS component in determination of MRP for sales of IMFL/Beer effected during 2010-13 resulted in extension of undue benefit to retailers by Rs 75.01 crore at the cost of the consumers, CAG had said in its report on Public Sector Undertakings for the year ended March 2013.
The report, placed in the state assembly in 2014, said that the state government has accepted the fact and MRP was revised in September 2013 excluding the TCS, but the government was silent regarding recovery of undue benefit already extended to retailers.
Rapped by CAG, OSBC has recently sent recovery demand notices to wine merchants. However, this move is opposed by the liquor vendors, who say, the demand notice has come without prior issue of the show-cause notice. Besides, every single retailer has to cough up minimum of Rs 8 lakhs to 10 lakhs, which is too hefty, if the decision is implemented, they complained.
The retailers said, the MRP is fixed by a price fixation committee of OSBC and they have no say in the fixation of the MRP. "Most of the retailers are even unaware of the calculation methodology for the MRP," said Pravat Kumar Dash, President, Wine Merchants Association, Khurda district.
He alleged, the move to recover the whopping amount seem to be a vengeful step on the part of state government after the High Court ordered stay on e-auction of liquor shops. If the e-auction would have been conducted, from whom they would have recovered the amount, he questioned. It may be noted OSBC determines MRP at which retailers would sell the products based on issue price plus Value Added Tax (VAT) and TCS at the rate of one per cent thereon. Hence, the wine merchants said, there is no loss to the government as the VAT and TCS are added only after the issue price is fixed by OSBC. "Even if the so called benefit is earned by us, we have also paid the income tax on the profits," argued a retailer.
The traders are all set to challenge the matter in the court.
