A uniform tax regime, if implemented, would be a boon for the organised liquor players in India like Vijay Mallya's United Spirits and Diageo as it would eliminate disparity in retail prices of liquor across states.
The special committee would comprise members from the liquor industry, state finance ministry, consumer organisations and industry bodies.
Among other proposals being considered is a programme by the Planning Commission in which the central government would provide compensation to states for three years to accommodate their loss of revenue from the new tax regime.
State-wise excise duties on liquor sales in India have drastic variations from Rs 25 to Rs 500 per litre across states with Mahrashtra imposing the highest duties and Punjab the least.
The $5-billion liquor industry in India has been urging the central government to enable states to adopt a uniform tax policy that will bring the liquor prices at the same level across the various states in India.
Pramod Krishna, director general, Confederation of Indian Alcoholic Beverage Companies (CIABC), said "We would be discussing the structured formula on how the new tax regime could be implemented. The new policy will consider revenue aspects as well as non-revenue aspects. Some of the non-revenue aspects that need to be implemented uniformly across states include same legal age to drink across states, label registration laws and same dry days."
The new committee to be formed would highlight 19 such non-revenue related aspects of uneven laws across states that need to be implemented along with the revised tax policy.
The liquor industry has learnt from the formation and implementation of value-added tax in India. The nodal agency negotiating the change in liquor policy is the Ministry of Food Processing Industries (MoFPI).
According to a Diageo spokesperson, "High duties in some state and low duties in others cause inter-state smuggling of liquor brands. It also encourages production and consumption of cheaper and low-quality liquor, like in cigarettes."
Val Smith, chairman, International Wine and Spirits Record, said, "When it comes to liquor, India is not one but 28 countries (referring to the 28 states) as there is a different legal framework for liquor sales in each state. If India wants to compete with other emerging markets like China, it must work on removing this disparity and uncertainty in the laws in each state."
