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India: Maharashtra State reduces VAT on Wine from 25% to 4%

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The Maharashtra government has announced a bonanza for wine companies in the state with the cabinet meeting at Nashik deciding to roll back VAT to 4% from 25% The decision to raise VAT to 25% recently kicked up a storm since investors in the business had got assurances of tax concessions by the state government.

Wine makers in the state had met Union agriculture minister Sharad Pawar for his intervention in the dispute over the hike in VAT. Pawar, in turn, has asked the state government to roll back the tax to 4%. Pawar’s family has a stake in the wine industry in Maharashtra. He also holds shares in the Four Seasons Winery at Baramati owned by Vijay Mallya.

According to sources, the low tax policy on wine would continue for the next 10 years. Apart from low VAT, the state’s wineries enjoy low excise duty as well.

Wine makers in the state have been demanding a Rs 250-crore bailout package since the wine industry has taken a beating during the recession.

The Indian Grape Processing Board, a newly constituted industry body, stated that the imposition of 25% VAT had brought down sales of wine by 60% since 2008. Many small wineries set up in the region of Nashik had threatened to stop buying grapes from farmers if the government did not provide them with the promised incentives.

According to S G Chougule, who heads the grape processing board and chairman of leading winery Chateau Indage, the wineries have accumulated a huge stock of unsold wines ever since VAT was imposed. Maharashtra, particularly Nashik, is India’s wine country with 60 of the 66 wineries in India located in the state.

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Saturday, September 23, 2:56 pm

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