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4-2017

Global hop market

A local alternative to mass beer suggested by independent brewers has been successful and is now altering the global market. Beer is becoming more diversified, so transnational companies have to accept the new game rules and to switch focus to young and fast growing markets. All these processes increased the demand for aroma and bitter hop as well as their acreage expansion on two continents. However now there appeared a downward trend of alcohol consumption in the world, so even special sorts can soon turn to be sufficient. In this connection the dynamic American hop market is already facing some problems. EU hop producers have become more cautious, they are not racing to exceed the demand and look forward with more confidence, judging by the contract terms. 

Hop Market in Russia

Germany still dominates the Russian market, yet over the recent two years one has been able observe a continuous success of Czech hop suppliers. Their expansion and growing popularity of hops from the United States became the drivers of supplies growth in 2016 despite the preceding modest harvest crop in the EU, as well as the factor of relative stability in 2017. In this connection, in 2017, the ratio of the varieties continued to shift towards the aroma ones, and the supplies of Magnum hop and other alpha varieties were reduced. However, the import of bitter hop pellets is partially replaced by extracts, especially from the major beer manufacturers. Total volumes of alpha acid supplies, according to our estimation, decreased by approximately 5% and returned to the level of 2015. Barth Haas Group continues dominating the hop products market; HVG also increased its weight. At the same time, Morris Hanbury significantly reduced the supplies in 2017.

India. Karnataka orders recovery of tax dues from UBL

Even as a consortium of banks led by State Bank of India (SBI) is struggling to recover loan dues amounting to Rs 9,091 crore from UB Group chairman Vijay Mallya, the Commercial Taxes Department of Karnataka has issued an order to recover tax dues amounting to several lakhs of rupees from Mallya-controlled United Breweries Limited (UBL).

The exact amount of entry tax that can be recovered from UBL is still being calculated by the department, according to which the company has not paid entry tax on movement of malted barley/barley malt into its brewery on the outskirts of Bengaluru. The firm has not paid entry tax dues from 2007 to 2009, sources told FE.

Vijay Mallya as the chairman of United Breweries holds 35.8% stake in the company (as on March 31, 2015), while Dutch brewer Heineken holds 42.4%. Mallya left India early this month as banks sought a court order to confiscate his passport and arrest him for not paying their dues.

The company instead contested the department’s claim in the Karnataka Appellate Tribunal and got a relief stating that malted barley is an agricultural produce and is not liable for any tax. Subsequently, the department had moved the High Court in 2011. The divisional bench of the Karnataka High Court, in its order in September 2015, upheld the department’s claim of levying entry tax on malted barley/barley malt under the provisions of Karnataka Tax on Entry of Goods Act, 1979.

“The notification (No. FD 11 CET 2002(1) dated March 30, 2002) provides for levy of entry tax in respect of raw materials and inputs, which are used in the manufacture of tobacco products and liquor. Hence, arecanut, tobacco and any other agricultural produce brought into the local area for the manufacture of liquor and tobacco products such as beer, cigarettes, cigar, gutka, churuts, zarda and quimam pan masala or any other products which can be classified as liquor or tobacco products are liable for entry tax,” a circular issued by Commissioner of Commercial Taxes said.

In the circular issued recently, Ritvik Pandey, Commissioner of Commercial Taxes has instructed the department officials to impose 1% entry tax on raw materials brought into the local area for manufacture of liquor by the company.

Despite repeated attempts, the management of UBL was not available for a comment.

“All the assessments/re-assessments concluded by the assessing authorities allowing exemptions as agricultural or horticultural produce are to be reopened and reassessed in the light of the order of the division bench of the High Court of Karnataka under the provisions of the Act,” Pandey said in his circular.

The commissioner has also instructed the department officials to take up all the cases of the respondents (United Breweries) for the previous years wherever exemptions are allowed for reassessment on priority and levy the penalty and interest as existed at that point of time for the relevant years of assessment or reassessment.

The enforcement authorities have been directed to take immediate action to cull out information and take up inspection and conclude the proceedings as early as possible and send the reports to the concerned offices to take up assessment proceedings against the company.

“Even though barley is an agricultural produce, it is liable for levy of entry tax when used in the manufacture of liquor at the rate of 1% as per the notification issued by the government on March 30, 2002.

The department is right in ordering for the payment of tax arrears from the defaulting companies,” said B T Manohar, chairman, state taxes committee, Federation of Karnataka Chambers of Commerce and Industry (FKCCI).

24 Mar. 2016

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