As the country waits for the government to deliver the first financial budget of a new decade, the air is rife with rumours and reports of all the possible measures that will be taken to bolster a flagging economy and workforce. And just like so many other industries in the country, the luxury sector could do with some good news.
“We would love to be able to offer our customers more options, but we can’t. We face a lot of challenges, being regarded as importing tobacco products into the country, which are in the highest import duty slab, and have to pay 160 per cent duty,” says Hemanth Sureddi, Managing Director, Cigar Conexion. Founded in 2011, Cigar Conexion is the official importer and distributor of several premium cigar brands, and recently opened a cigar shop and smoking lounge in the Capital.
Given that their entire catalog of products is imported, the taxes are, well just that.
“I’m sure the government has bigger things to worry about than cigars, but it’s the same case within the wine and alcohol industry. People are getting in the really good quality bottles of these through friends because of the ridiculous import duties and the government is losing out on the revenue either way. Instead, they could lower duties so people can buy them at better prices here, and they could collect taxes from the huge increase in sales within the country itself,” says US-based Rocky Patel, whose company is one of the leading cigar manufacturers in the world.
And it’s not like people purchase bottle and bottles of expensive wines and get inebriated all the time.
Like a fine (and still relatively expensive, even if duties are slashed) bottle of Whiskey or even a premium cigar, a high-end wine is going to remain an indulgence, meant be enjoyed by adults on occasions of note.
“The problem in this country, despite the fact that our GDP is among the strongest in the world, is that import duties are so high that we are perhaps the smallest market in the world for cigars. And that’s not because people don’t smoke, but because people can’t afford to buy imported cigars in India and would rather get them from abroad during holidays or from visiting friends,” adds Patel.
And given that luxury consumables are increasingly being retailed by high-end hotels as well as restaurants, be they wines like actual Champagne from France, or Super Tuscans from Italy, or Scotches that have passed the legal drinking age themselves, and yes even cigars. It’s affecting their bottom lines and that has got to hurt.
Within Delhi itself, in late- 2019, several popular restaurants had run out of many imported liquors, wines and beers, leading to instances like The Beer Café being unable to hold Oktoberfest for the first time in six years in any of its outlets across Delhi.
Restaurateurs like Umang Tewari of Big Fish Ventures, which owns restaurant chains like Garam Dharam and Junkyard Cafe, noted that, at the time, they could only wait for their depleted stocks to be replenished. While that temporary shortage was due to registration of new brands at the Delhi excise department and has since largely been solved, it hit pubs, restaurants, and hotels hard. And the root problem remains the same, with high import duties and other red-tape making the industry’s account balance books inclined to see red. Meanwhile, things seem to be taking a turn in the opposite direction.
As reported in The New Indian Express from PTI on Sunday, January 19, “The Commerce Ministry has recommended restricting purchase of taxfree alcohol to one bottle at duty-free shops as part of steps to reduce import of non-essential goods, sources said. The ministry has also recommended to its finance counterpart that purchase of cigarette cartons at duty-free shops should be prohibited, they said.
These recommendations are part of proposals made by the commerce ministry for the forthcoming Budget, which would be unveiled by Finance Minister Nirmala Sitharaman on February 1. Currently, inbound international passengers are allowed to buy two litres of alcohol and a carton of cigarette from these shops.”