The next time you reach for a bottle of Chivas Regal at your neighbourhood watering hole, you will be likely feel a deeper hole burned in your pocket.
The increase in service tax rate from 12% to 14%, announced in the Union Budget 2015-16 on Saturday, will not just cost you more when you order a peg of alcohol at a bar but also when you buy a bottle.
“Service tax to be levied on service by way of carrying out any processes as job work for production or manufacture of alcoholic liquor for human consumption,” said finance minister Arun Jaitley. The move to include liquor in the service tax net has disappointed the domestic market already battling high cost of raw materials.
“We were already suffering from inflation on our basic raw material and over that a 14% service tax has been imposed,” said Deepak Roy, executive vice-chairman and CEO, Allied Blenders and Distiller, and past chairman, Confederation of Indian Alcoholic Beverage Companies. “It is going to hurt our profitability immensely as unlike other industries we cannot pass the burden of price increase to the end consumer. Because of price controls on alcohol, we are allowed to increase prices only after three to four years.”