Shobhan Roy, Director General, AIBA
I would like to visualize the scenario post- April 2017 when GST will have been implemented. What is going to happen to the liquor industry? The liquor industry will not have benefits from the input tax credit. It will be covered by the state GST and it will have to complete all the compliances of a hashed-up GST which is being rushed through.
The post-April GST scenario will be something like what we are going through as a result of demonetization which is not directly affecting the industry but it has affected the government and consumers. GST will take us to a period of pain and turmoil. What is more surprising is the
speed at which the government is forcing GST implementation.
Few days back we met very senior bureaucrats from a state. They said that they were put in a room for working out GST implementation after breakfast at 9 am and they could get out only at 9 pm. Ultimately, on the third day it became so exasperating that the bureaucrats said, “Do
whatever you want to do. We are leaving”.
Given this state of affairs, I am sure registration and litigation post-April 2017 will be something you and I cannot even imagine. The other thing that we discussed is the increase in the raw material prices which are not getting set off. We will pass the price rise to the consumer. Product prices will go up, volumes will shrink, and the government revenue from the liquor products will also go down. But they look at the industry with a feeling that its consumers are
willing to pay more from their disposable income. They are not realizing that we have reached a point where no further price increase is possible. So volume shrinkage or shifting down the value chain is bound to happen.
But then states say that even if their revenues fall, the centre is going to compensate them for five years. Due to the assurance of getting central compensation, the sympathy for the industry, which is supposed to be there as the industry is states’ bread and butter and gives them revenues for their daily expenses, is still not sinking in.
We were with a very senior bureaucrat of a state. Regarding the possibility of a decline in liquor revenues, he visualized the salary payment problem. He said, “Right now because of liquor, my state government employees get paid timely. Tomorrow if there is a revenue deficit, the only question in our minds will be when will the centre give our next compensatory instalment?” So you will have a scene where the centre will be controlling the finances of the states but in spite of this you will not be free of mandatory registrations.
I will give you an example – if a company has four manufacturing units and has warehouses in 30 states, currently it is required to take four registrations for excise purposes and
30 for sales tax purposes. Under GST, a non-liquor company would be actually doing 30 but a liquor company will have to take a total of 65. The 65 registrations will include your existing registrations and new registrations under GST. Sixtyfive registrations means 65 timely submissions of the reports and 65 show cause notices to answer which you will need the
services of financial consultants. In fact, the alcohol beverage industry will be using consultants and consultants a lot to supervise registration/taxation cases to save themselves in
the years to come.