As a possible signal of support to their heavily regulated beer industry the Indian government is looking to revise their beer classification categories which will almost certainly lead to a change in the taxation structure.
Current regulations link the taxation of beer with high alcohol liquor. Beer, which cannot contain more than 8.0% ABV (alcohol by volume) is referred to as a ‘low-alcoholic beverages’. Anything over 8% cannot currently be classified as beer.
This change in regulations is expected to reflect a range of concentrations of alcoholic content in beer with 0.5% to 5.0% ABV being considered ‘Regular or Mild’ and 5.1% to 8% considered Strong.
However, the status of beer between 0.0% – 0.5% has yet to be finalized, particularly beers that claim to be alcohol free. Such beers, with a stated ABV of 0.0%, in many cases contain traces of alcohol (often less than 0.03% ABV) which leaves their classification open to interpretation and possible taxation as beer and not soft drinks if they are considered low-alcohol and not no-alcohol.
N . Bhaskar, the Advisor for Standards at the Food Safety & Standards Authority (FSSAI) said of the new government regulations covering no-alcohol beer “A new clause shall be inserted in Part 4, Regulation 4.1 (of the Alcoholic Beverages Regulations) related to ‘Beer’, namely that Alcohol-free beer shall carry alcohol by volume (ABV) level of 0.0”
However, he goes on to note that these changes are not expected to come into force immediately, that the “New draft regulations (for Alcoholic Beverages) are in the process of being notified, and the finalisation of these regulations are likely to take some time”
This will be a blow to Anheuser Busch InBev and Heineken who are both experiencing solid growth in India with their zero alcohol beers.
The Telegraph India recently reported that breweries were seeking a de-linking of beer and spirits taxation to counter the steep rise in local alcohol taxes that has seen beer prices raise 10-75% across states since the start of their government imposed lockdown on March 25th.
Talking to the newspaper Kartikeya Sharma, president, South Asia, for Anheuser Busch InBev said “Beer is a moderate alcohol beverage. However, in India, unlike the rest of the world, it is taxed 60 per cent higher than hard spirits, despite it having vastly lower alcohol content. This puts beer at a considerable cost disadvantage. To accelerate growth for an otherwise crippled sector, the government should explore the possibility of delinking the beer sector from the hard liquor industry along with introducing a central taxation policy.”
In May local government officials in India’s capital, New Delhi, imposed a special tax of 70% on retail alcohol purchases to deter large gatherings at liquor stores. However their motives were questioned as it is well known that states across India rely heavily on the contributions liquor tax makes to their coffers, something many brewers would like to see changed.
