The Indian wine tax dilemma

Dec 04 2011, 14:23 IST
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SummaryRecently I was exposed to a very interesting and layered problem. I was sitting with some Indian winemakers and few other luminaries

Recently I was exposed to a very interesting and layered problem. I was sitting with some Indian winemakers and few other luminaries, all concerned about the state of the Indian wine industry, and the one word that came up more than just often, a fairly strong word, often blurted with a force akin to spitting it out, as if it was best dislodged vehemently as an unwanted projectile was: Tax!

Taxes not just as levied on foreign wines, but also taxes as applicable to local wineries. I listened in quietly, for there was so much I didn’t know, a state of ignorance that had often made me wonder why were Indian wines, especially when produced in a country with one of the lowest labour costs, so expensive?

But first, the premises. We all know that foreign wines are subject to heavy taxes, to the tune of 160%. This is the customs component, something that most hotels don’t pay and yet smugly seem to forget when they put the price on their lists.

But then, each state functions independently and adds a local tax, which is probably arrived of by a complex calculation which, judging by the current rate, I can only rationalise is based on fantastical whim, insurmountable greed, and deep-rooted sadism. Without going into details, it suffices to sum up that when a wine ends up for about ten times its originating price at its point of depart, it isn’t just the hotels playing the profit game. As a result, the choices on an outing are either to pay through our noses for a basic yet acceptably good internationally reputed Scotch or pay through our noses for some supermarket brand of wine, which could be best described as mediocre. Needless then, the drinking classes vote in favour of spirits.

But what about local wines, I always wondered? Why are they priced around $10 when their quality is perhaps worth no more than $3 at best? Surely the Indian winemakers aren’t as short-sighted on the profiteering front in order to maximise margins beyond reason. I am sure they know that high margins on decent-but-average wines will only ruin their long-term standing, not to mention retard the growth of the wine market.

Back to this conversation I was having, it soon became apparent that I was guessing right—they were well aware that prices are well beyond the reasonable. A kilo of wine grapes

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