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The Government of
India has issued a new circular giving relaxation in import duty on Bottled
in Origin alcoholic beverages and other items used by hotel industry.
All hotels
earning foreign exchange will be entitled to a Duty Free Import License.
This license will be equivalent to 5% of their average foreign exchange
earnings in the last three years. This license can be used by hotels to
import any item, consumables or capital goods without payment of any import
duty. Since alcoholic beverages are subject to heaviest duty obviously it
will be more profitable for them to import alcoholic beverages without
payment of duty. However the license will be issued to the extent of duty
saved as illustrated below:
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Average 3 years Foreign Exchange Earning of
a Hotel |
Rs. 100 Crores |
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Value of Duty Free License (5%) of above |
Rs. 5 Crores |
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Say CIF value of imported wines |
Rs. 1,200 /- case |
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Duty on above CIF Value |
Rs. 3,160/- case |
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Duty Free Import Allowed |
Rs. 50,000,000/3160 = 15,822 cases |
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(This is only an
illustration to show utilization of license. The hotels however have to use
the license for all their import duty free requirements)
The companies can
now use this option to introduce this route to leverage their pricing by
making a very strong pitch for bulk buying from hotels at prices which are
competitive than the domestic wines and use this platform to create a brand
awareness and also launch their brands in retail market to take advantage of
brand awareness.
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