Wine producers, grape growers cry foul over tax hike

BENGALURU: The state government, which had promised support to the wine industry in Karnataka, has dashed all hopes of grape growers with a gazette notification proposing 177% hike in tax. The notification issued on June 22 provides a seven-day window for wine producers to file objections. Taxation will come into effect from July 1. Calling it a unilateral decision, grape growers and wine producers have decided to resort to a state-wide agitation from Wednesday.
Till now, wine producers were paying Rs 17 per litre to the state government as excise duty and additional excise duty.With the new tax rates, they’ll have to pay Rs 47 per litre to the government. This means, a bottle of wine which is sold for Rs 100 now will cost Rs 265 from July 1.
“The government is asking us to use grape spirit which isn’t produced in Karnataka. We use neutral spirit to make wine. Grape spirit is used only for essence and is suitable for making brandy. While it’s produced in abundance in Maharashtra, Karnataka has no grape spirit policy. This sudden taxation has put both wine producers and grape growers of the state at risk. We feel there’s a strong lobby and vested interest are at play, pushing the government to take such an irrational decision,” said JVM Mohan Rao, owner of Heritage Grape Winery.
“Though Bangalore Blue (grapes) are more sellable than the French variety, the government, instead of encouraging our speciality, is more interested in encouraging Maharashtra which produces grape spirit. This too hints at the presence of a lobby,” he added.
Said P L Venkatarama Reddy, president, Karnataka Wine Producers Association said: “The wine policy was introduced with a view to encourage consumption of wine, a healthy alternative to alcohol. However, with this steep hike in tax, cost per bottle will go up and wine consumers will be compelled to turn to alcohol once again. Only six months ago, the government had assured us that the tax wouldn’t be more than 20%.”
“We even agreed using grape spirit instead of neutral spirit but this would need huge investment and time, something the government is not prepared for. Around Rs 50 crore will be needed to put up a grape spirit distillery alone,” Reddy added.
The steep hike is tax will also adversely affect thousands of grape growers in the state ,especially the Bangalore Blue growers.
“This new tax will bring down annual sale of wine from 60,000 case at present to 15,000 cases. Also, production of Bangalore Blue variety of grapes will decline from 9,000 tonnes annually to 2,250 tonnes. The Bangalore Blue growers have small land holdings and this will affect thousands of growers and their families,” said Naryanaswamy from Karnataka Grape Growers Association.