Is There GST on Alcohol, Liquor and Beer? Alcohol has been exempted from the goods and services tax (GST) for now as it needs a constitutional amendment for bringing it into the new tax regime. The decision is speculated to impact negatively on the sector. While there are high chances that the cost of beer will rise.
What impact would GST have on liquor sector?
The share prices of liquor companies have already dropped up to 6 per cent in the past four sessions with IFB Agro Industries BSE -7.25 % falling the most at 6.4 per cent, followed by Global Spirits (down 5 per cent), Ravikumar Distillaries (down 5 per cent), United Breweries (down 5 per cent), Mount ShivalikBSE -4.52 % (down 2.5 per cent) and Winsome BreweriesBSE -2.52 % (down 1.40 per cent).
Edelweiss Securities assumes the sector will be impacted negatively unless the government permits the refund of the irrecoverable taxes. There is also a clarity awaited on the input tax credit under GST.
Beer will be Affected by the Impact of GST
Shekhar Ramamurthy, MD, United Breweries, said the beer will be affected by the impact of GST, as output is excluded from the GST but input is fully in.
“We have to register ourselves with GST at each and every location we operate in. Our input materials at present attract excise duty, sales tax, VAT at between 12 per cent and 15 per cent, whereas under GST, this is likely to be at 18 per cent. So, there is a clear increase in tax on most of the input materials by between 3 per cent and 6 per cent,” Ramamurthy said.
Ramamurthy also added that the industry works with second-hand bottles. Under the present tax regime, second-hand bottles are not liable to excise duty, because they do not move through factory gates, second, third, fourth, fifth time, they only attract local sales tax. Now, this issue of the industry is being discussed with the GST Council.
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The industry believes that the GST council will take the matter into consideration because the impact will not be on those who take the second-hand bottle into use but on all other industries who take used goods into practice.
The tax impact on the bottles will go high up to 12-18 percent from the present 5-6 percent. This will happen only if the bottles fall under the full GST rate bracket.
“Today freight is subject to service tax at full 15 percent, what it is now. Tomorrow it will become 18 per cent. There is a big impact. We estimate that the impact on United Breweries could be anything between Rs 100-160 crore depending on how it pans out,” he said.
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