Latest Notification Issued By Sikkim Excise Abkari Dept. Exempting Foreign Liquor from Excise Duty makes Sikkim the cheapest destination for imported foreign brands .

State Excise Coffers to collect less revenue comparatively to other states.


Gangtok:Before a toast is raised, the fine print should be read and the implications considered. Initially, it is natural to rejoice at the fact that the Excise Abkari department of government of Sikkim has exempted excise duties on foreign wines and spirits .This step of Government of Sikkim is likely to emit wrong signals since the government of India has advised state governments to levy excise on foreign liquor at the same level as domestic spirits in view of the fact that it has in compliance with the World Trade Organization commitments has reduced actual customs duty from about 550 per cent at the highest level to 150 per cent flat for wines or from 230 per cent to 100 per cent for spirits.
In mid-July,2007 Maharashtra shocked the liquor industry by delivering an excise blow of 100 per cent for beer, 150 per cent for wine and 200 per cent for spirits on the assessable value of foreign liquor. This was shortly after the Centre had slashed additional Customs duty by 20-75 per cent on imported spirits thus becoming the first to levy a hefty excise duty on imported spirits.
In its second blow to liquor imports, the Maharashtra government has withheld imported liquor stocks on the basis that they do not display the maximum retail price.Unlike Sikkim -Maharashtra Excise dept not issuing release orders for imported liquor without MRP.
Since July 16, Maharashtra’s excise department has not issued release orders on imported liquor stocks that do not display the maximum retail price. The state accounts for 35 per cent of the country’s annual imports of 600,000 cases of liquor.

The state government of Maharashtra has also levied an additional Rs 2.5 lakh licence fee on licensee distributors for distributing imported liquor. Sources said this might be raised to Rs 5 lakh soon.


The Maharashtra government’s new tax regime is leaving spirits costlier by 10-15% and wines by 25-30% in Mumbai, the country’s top market for international brands. Retail prices of premium brands imported from abroad such as Johnnie Walker Black Label, Chivas Regal and Glenmorangie Single Malt are set to rise by at least Rs 350-400 per quart, while that of Moet Chandon Champagne is expected to move up by Rs 1,000 per bottle. JW Black Label could cost over Rs 3,500, up from Rs 3,150. Moet Chandon’s retail price may go up to Rs 4,853, up 30% in Maharashtra.
Excise Department of Sikkim 's move to exempt excise duties on foreign imported brands but levies of import pass fees will increase its revenue collection on foreign liquors from existing total of Rs.843.75 to Rs.1080 a case bringing in addition revenue of modest 20% comparatively to Maharashtra's revenue collection on similar products likely to get more for state coffers by levying an ad valor em excise duties of 200% on the assessed value (CIF) of imported spirits brands and 150% on wines/champagne therefore latest notification is likely to make sure that Sikkim becomes the cheapest destination for imported foreign brands category in country.The steep decrease (0%) in excise duty on imported foreign liquor by Sikkim Excise department will be detrimental to the revenue interest of the Sikkim where state government is implementing hydro-electric projects despite protests by people for the sake of safeguarding its economy by boosting revenues through hydel projects .
The excise duties,import pass fees,export pass fees,bottling fees all are together are generally termed as excise levies and no states in India have their excise revenue collection by was of import pass fees more than 2-3% out of its total excise revenues .Anyone familiar with liquor industry would fails to comprehend the motive of latest notification issued by excise abkari department of Sikkim exempting excise duties but rising Import pass fees which is a move unlike other states have followed in terms of foreign liquor.
Sikkim must undertake like Jharkhand a comprehensive review of its fiscal policy in terms of changing liquor industry for having better and higher revenue collection in commensurate to growth of liquor industry itself. The notification granting exemption of excise duty on foreign liquor would certain ally lead to a leakage of revenues. As There is every probability of it being misused by those who want to make fast bucks out of lower rates of imported foreign liquor on shelves comparatively to those prevailing not only in Mumbai or Delhi ,even in west Bengal. Parties would be quick to cash in windfalls by importing consignments in name of Sikkim but finally landing somewhere else just like one finds Sikkim brands of liquors beyond the Rangpo but this time Sikkim state exchequer would be a loser as it notifies Zero excise duty on foreign liquors where it is in range of 150% to250% in other states selling alcoholic beverages...one can quickly guess the amount of difference in rates by doing back-on-envelope calculations.

But it is well known that these reductions will not reflect actual reduction in prices since they do not take into consideration state excise duties which will still be levied. This factor is important since the government of India has advised state governments to levy excise on foreign liquor at the same level as domestic spirits to protect the domestic liquor industry. In other words, foreign liquor will not enjoy a level playing field with its domestic competition since it will be subject to customs duties as well as state excise levies.

Therefore,the latest notification issued by Excise abkari department of Government of Sikkim granting exemption of excise duties on foreign spirits and wines is a telling example that it is going to defeat the very purpose of Government of India slashing customs duties on foreign spirits including wines and beers to give states further leverage in imposing state excise duties to boost their revenue collections .

Sikkim Excise Abkari Department officials at highest level have claimed that all the states in India have done away with excise duty on foreign liquor which itself is not based on correct information as It is well known fact that Maharashtra is the biggest consumer of foreign spirits in the country and It was also the first state in India to take fizz out of customs duty party of Scotch Majors by levies hefty state excise duties. Mumbai and Delhi account for 75% of the 6-lakh case imported spirits and wine market.
The Sikkim excise revenue collection for year 2004-2005 stands to Rs.3268 lakhs and for year 2005-2006 collection increased to Rs. 3296 lakhs showing a dismal growth of less than 1% in comparison to 17.5% growth in excise revenue for Andhra Pradesh and 12 % for West Bengal and double digit growth for many other states.

In Sikkim,There are as many as five distilleries, including one beer brewery, operational in the State including recently opened new distillery Unit M/s.Mayell & Fraser . Mayell & Fraser is the only unit in Sikkim which imports scotch from Scotland for blending in its products.Its first product, Castle Pride, a deluxe grain whisky, was born out of a tie-up with world famous scotch producers Angus Dundee Plc of Glasgow in Scotland.

There has been in LPL production of Sikkim state's largest unit Sikkim Distilleries has fallen in last 3 years whereas its nearest competitor in state Mount Distilleries has been growing at steady pace as it has been constantly diversified its products including its foray into launching Sikkim's own wines for the first time in state.

The major success story has been that of Bollywood Film star Danny Denzongpa's unit Yuksom breweries which produces the world class Dansberg blue beer, recently rated as the best beer in the country. Yuksom Breweries has already opened its second unit in Orissa and third unit is underway in Assam. Himalaya Distilleries has not been much of success as it has been constantly lowering its LPL production in last 3years and capacity utilisation is also less that 25% of its installed one.

In Sikkim,At present, there are 602 foreign liquor off-shops and 459 bars in the Sikkim as per annual report of 2005-06 on Sikkim Government website, of which “over 60 per cent” are located in the city. There is also a blanket ban on issue of any new license for foreign liquor shops in Sikkim as state government's policy to check further increase in alcoholism.Sikkim Human Development Report 2001 also acknowledges the fact the Sikkimese are generally perceived to be alcohol friendly people.
http://sikkimnews.blogspot.com/2007/08/excise-dept-of-sikkim-does-wrong-duty.html
(with inputs from Business Standards, Economic Times, Sikkim Excise reports on Sikkim Govt.Website)