Laxmi Capital News
Liquor wholesalers earn hefty profit on post-budget sales

 Wholesale liquorstores have taken advantage of the increased excise duty on liquor imposed bythe Fiscal Year 2018/19 budget.

Wholesalershave inflated the price of liquor in their old stock based on the new rate withthe intent to make maximum profit.

Ithas been found that the wholesalers were stockpiling huge quantities of liquorin their warehouses anticipating changes in duty rates so that they could sellproducts of an earlier stock at a higher rate to retailers.

Oncethe budget is prepared, the manufacturers themselves instruct wholesalers tostockpile liquor by purchasing huge quantities, after which they sell it at aninflated price tag as soon as the budget is out. These wholesalers then sellliquor based on the new rate. This type of profit earning trick is alsooverlooked by the Inland Revenue Department (IRD).

Althoughthere is usually an increase in excise duty, as the government increased thisby higher rates this year.Finance Minister Yuba Raj Khatiwada presented thebudget for FY2018/19 on May 29, where he classified liquor into two categories:beer and alcohol (raksi). According to liquor entrepreneurs, the excise dutyimposed on beer is 40 percent while that for alcohol is 40 percent.

Followingthe budget speech, wholesalers have created a shortage of alcoholic beverages(particularly beer) and have been selling it to retailers only if they arewilling to pay a high price for it. Moreover some manufacturers and wholesalershave also released a new price rate for their products and retailers andconsumers have had to bear the burden of paying high price for even products ofan earlier stock.

“Liquorwas easily available before the budget was unveiled. Now in a matter of days,wholesalers have created a shortage for alcoholic beverages. They say that theywill only supply liquor if we give them the rate they desire,” stated a liquorseller of Dharan.

Althoughthe budget will be implemented as the new fiscal year kicks off, the duty ratesfor liquor for the next fiscal year starts to take effect from the day thebudget speech was delivered. For this very reason, the government has a revenueunit in each industry so that the new excise duty sticker can be placed on thenewly produced products even before the new budget come into action.

Asthe retailers are unable to stockpile a good amount of liquor, they are forcedto purchase liquor at an inflated price. Liquor seller ManitaGurung toldRepublica that there were rumors that the excise duty for liquor will skyrocketand the company has already sent us their quotation on rates. “When we try toreceive products at the previous rate, we get nothing. At this point, the rateof beer has increased so much so that costumers also return surprised afterhearing the new price,” she said.Monoj Shrestha, an authorized dealer of liquorstated that it is common that retailers have to pay the new rate of liquor asthe budget speech is delivered. It was not much of a problem in previous yearsas the surge in excise duty was not as much however the increase in duty thisyear has been high.

Headded: “It would not have a problem selling the liquor at the previous pricehowever the revenue office also takes action against us if we sell them at theformer price. And it seems natural that we will earn better profit by doingthis.”

Accordingto Nabin Tamang, president of Liquor Entrepreneurs Association, Dharan, the oldstock of liquor lasts until the festivities of Dashain and Tihar. “If we do notimplement the new price on our products from now, we will be blamed for evadingtaxes and thus we are forced to sell liquor at the inflated price.

Headded: “The problem here is the excessive price hike on their beverages. Priceof alcoholic beverages that used to hover around Rs 2,700 has skyrocketed to Rs5,200 now.

Accordingto the association figures, Dharan consumes a monthly average of 25,000 cartonsof beer, 2,500 carton wine 1,500 cartons of 25 UP Brand Raksi, 1,200 cartons of40 UP and 9,000 cartons of 50 UP alcoholic beverages.

Theprice of a carton of Gorkha Strong Beer which used to cost Rs 2,344 previouslyin retail market now costs Rs 2,819 for retailers while the price consumershave to purchase it will hover around Rs 3,000.

Source:MyRepublica, 6th June 2018

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