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IT State The wine trade is
raising a toast to the significant reduction of the excise fee levied by the
government of the southern state of Karnataka, whose capital Bangalore is
India's Silicon Valley and the third most valuable wine market. Karnataka
has reduced the excise fee per bulk litre of wine from 33% of the duty-paid
price to a flat rate of Rs 70.It means that the excise fee, effectively, has
come down to Rs 52.50 for every 750ml bottle of wine. The new rule came into
effect from April 1, a date that marks the beginning of the 2006-07
financial year.India follows a two-tiered taxation system for spirits, wine
and beer, and it's becoming a serious bone of contention with the European
Union and UK's Scotch Whisky Association. On top of the basic customs duty,
countervailing duty, special additional duty and a 2% education cess levied
by the central (federal) government, the wine importers have to pay separate
label registration charges in each of the states (provinces) in whose
markets they wish to operate and a 'vend fee' or 'excise fee' per bottle.
So, the wines that five-star hotels import under their duty-free quotas
cannot escape taxation by the states.The reduction is significant because
Karnataka is the backyard of India's booze baron (and airline operator)
Vijay Mallya, who has been opposed to any kind of concessions for imported
alcoholic beverages. The state government's move will make imported wine
more competitively priced with respect to domestic labels, which, observers
believe, are overpriced. Karnataka is where India's major winery, Grover
Vineyards, is located within a short drive outside Bangalore. Will the move
turn the heat on Grover's wines from foreign competition? Industry observers
are unanimous in saying 'yes'.
Subhash Arora
President, Indian Wine Academy
www.indianwineacademy.com
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