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Karnataka govt slashes proposed 100% hike in liquor licence fee by 50%; micro-distilleries say their concerns overlooked
BENGALURU: In double cheer for liquor industry, state govt has slashed the proposed 100% increase on licence fee for distilleries and wine shops by 50% and rolled out relief by planning to conduct regulatory inspections from once a year to once in five years from now on.
Two weeks ago, representatives from wine stores and distillery owners' associations met CM Siddaramaiah and finance department officials to push for a reduction in the recently announced steep increase in licence fees.
The new fees and spaced-out once-in-five-year inspections will take effect on July 1.
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Finance department officials defended the hike, stating that if the increase is annualized, it amounts to just a 5% increase a year over eight years.
For perspective, the licence fee (CL-9, or for bars and restaurants) was sought to be doubled from Rs 7.5 lakh a year to Rs 15 lakh a year under the proposed 100% hike move. With increase now pegged down to 50%, the revised licence fee will be Rs 11.25 lakh a year. "Since the licence fee had not been increased for close to 8 years, we decided it was much required to increase the revenue. Considering that all stakeholders had to be taken into confidence, the CM and I decided to reduce the licence fee by half," said excise minister RB Timmapur.
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Industry bodies called the rollback a significant outcome of lobbying efforts. "The govt has sacrificed Rs 400 crore in revenue," said S Guruswamy, president of Karnataka Federation of Distilleries.
The govt's plan to hike licence fees by 100% was expected to fetch Rs 600-700 crore a year. Referring to the once-in-five-years' verification and approval process, he said this move will save a lot of trouble for wine stores, distilleries and breweries.
While these rollbacks have been widely welcomed, smaller players and micro-distilleries said their concerns have been overlooked in a system still geared towards one-size-fits-all taxation. One of the strongest voices of dissent came from Huli Spirits, a micro-distillery that produces handmade jaggery rum. The company's founder accused the govt of driving small players out of the state.
"I've made multiple representations to the government to ask them for categorising the distillery companies in the state when deciding who should pay how much licence fee to operate.
It is unfair for them to levy the same Rs 1.1 crore on a distillery who is bottling perhaps 1,000 a day in numbers as well as me who is bottling 100 a day. A micro-distillery makes it all handmade and has operations similar to that of micro-breweries who have more liberal taxation policy.
We should plan to create a similar concession for a craft distillery," Arun Urs, founder of Huli Spirits, said.
Urs tweeted Tuesday afternoon that the CM from a neighbouring state offered a "tailormade" excise policy to set up distilleries. Despite the reduction, CL-2 wine store owners said they still face cost escalations. "CL-2 stores have to pay increased licence fee and calculate fixed costs at inflationary rates, which include rent, salaries and electricity," said Honnagiri Gowda from Karnataka Wine Merchants' Association.
There are over 4,000 CL-2 wine stores in Karnataka, with 1,400 of them operating in Bengaluru alone.
Reacting to this, Timmapur said not all decisions could please all stakeholders.
