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What happened
ISWAI, the lobbying group for Diageo and Pernod Ricard, has initiated legal action against the Maharashtra government due to a sharp tax increase on affordable liquor brands. The state recently introduced a policy that favors local manufacturers by creating a new category called 'Maharashtra Made Liquor,' which allows them to sell products at a lower tax rate. However, this policy excludes foreign investment, resulting in a tax hike from 300% to 450% for other premium brands. This change has severely impacted sales, with affected brands experiencing a 35-40% drop in recent weeks. Maharashtra is vital for the liquor market, contributing significantly to premium spirit sales. The case is set to be heard by Mumbai's High Court on December 9, as ISWAI argues that the policy creates unfair trade barriers.
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Key insights
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Impact on Sales: Sales of affected brands have fallen by 35-40% since the tax hike.
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Local vs. Foreign Firms: The policy grants an advantage to local manufacturers over global companies.
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Maharashtra's Market Share: Maharashtra accounts for 7% of India's premium liquor consumption.
Takeaways
The lawsuit by ISWAI against Maharashtra highlights the ongoing tensions between local policies and global business interests in India's liquor market. The outcome could set a precedent for future regulations affecting foreign investments.