Liquor wholesalers earn hefty profit on post-budget sales
June 6, 2018 03:00 AM NPT
By: Rohit Rai
Wholesalers impose new tax rate on old products
DHARAN, June 6: Wholesale liquor stores have taken advantage of the increased excise duty on liquor imposed by the Fiscal Year 2018/19 budget.
Wholesalers have inflated the price of liquor in their old stock based on the new rate with the intent to make maximum profit.
It has been found that the wholesalers were stockpiling huge quantities of liquor in their warehouses anticipating changes in duty rates so that they could sell products of an earlier stock at a higher rate to retailers.
Once the budget is prepared, the manufacturers themselves instruct wholesalers to stockpile liquor by purchasing huge quantities, after which they sell it at an inflated price tag as soon as the budget is out. These wholesalers then sell liquor based on the new rate. This type of profit earning trick is also overlooked by the Inland Revenue Department (IRD).
Although there is usually an increase in excise duty, as the government increased this by higher rates this year.Finance Minister Yuba Raj Khatiwada presented the budget for FY2018/19 on May 29, where he classified liquor into two categories: beer and alcohol (raksi). According to liquor entrepreneurs, the excise duty imposed on beer is 40 percent while that for alcohol is 40 percent.
Following the budget speech, wholesalers have created a shortage of alcoholic beverages (particularly beer) and have been selling it to retailers only if they are willing to pay a high price for it. Moreover some manufacturers and wholesalers have also released a new price rate for their products and retailers and consumers have had to bear the burden of paying high price for even products of an earlier stock.
“Liquor was easily available before the budget was unveiled. Now in a matter of days, wholesalers have created a shortage for alcoholic beverages. They say that they will only supply liquor if we give them the rate they desire,” stated a liquor seller of Dharan.
Although the budget will be implemented as the new fiscal year kicks off, the duty rates for liquor for the next fiscal year starts to take effect from the day the budget speech was delivered. For this very reason, the government has a revenue unit in each industry so that the new excise duty sticker can be placed on the newly produced products even before the new budget come into action.
As the retailers are unable to stockpile a good amount of liquor, they are forced to purchase liquor at an inflated price. Liquor seller Manita Gurung told Republica that there were rumors that the excise duty for liquor will skyrocket and the company has already sent us their quotation on rates. “When we try to receive products at the previous rate, we get nothing. At this point, the rate of beer has increased so much so that costumers also return surprised after hearing the new price,” she said.Monoj Shrestha, an authorized dealer of liquor stated that it is common that retailers have to pay the new rate of liquor as the budget speech is delivered. It was not much of a problem in previous years as the surge in excise duty was not as much however the increase in duty this year has been high.
He added: “It would not have a problem selling the liquor at the previous price however the revenue office also takes action against us if we sell them at the former price. And it seems natural that we will earn better profit by doing this.”
According to Nabin Tamang, president of Liquor Entrepreneurs Association, Dharan, the old stock of liquor lasts until the festivities of Dashain and Tihar. “If we do not implement the new price on our products from now, we will be blamed for evading taxes and thus we are forced to sell liquor at the inflated price.
He added: “The problem here is the excessive price hike on their beverages. Price of alcoholic beverages that used to hover around Rs 2,700 has skyrocketed to Rs 5,200 now.
According to the association figures, Dharan consumes a monthly average of 25,000 cartons of beer, 2,500 carton wine 1,500 cartons of 25 UP Brand Raksi, 1,200 cartons of 40 UP and 9,000 cartons of 50 UP alcoholic beverages.
The price of a carton of Gorkha Strong Beer which used to cost Rs 2,344 previously in retail market now costs Rs 2,819 for retailers while the price consumers have to purchase it will hover around Rs 3,000.