Jan 13, 2013 (Reuters) – From tax notices and allegations of illegally boosting share market, Pernod Ricard, a French liquor company, is currently facing several regulatory and business challenges in India. India is one of the key markets for its growth.
Absolut vodka and Chivas Regal are made by Absolut vodka, making it the 2nd-largest spirit company in India and globally. India’s largest alcohol company, it accounts for 17%.
These are the most recent problems the company faced.
* DELHI CITY INVESTIGATION
Pernod was under investigation by India’s Enforcement Directorate since last year as part of an investigation into whether politicians, retailers and manufacturers colluded in order to illicitly benefit from 2021’s auction of New Delhi liquor retail licenses.
According to Pernod, Pernod violated the liquor policy in capital city. It used bank guarantees in order to make retail investments.
Pernod Ricard India stated that it denies all allegations made by the directorate and said it would continue to cooperate fully with Indian authorities.
* FEDERAL TAX DEMAND
The tax demand from the federal government is almost $250 million. It was made by the spirits industry giant for undervaluing imported goods for more than a decade in order to avoid paying full duties.
In a filing to a court last year, India’s Customs Authority called the company “habitual litigant” in which it accused the Government of India of conspiring “to defraud its legitimate income.”
Pernod challenged Pernod’s demand and said it “always endeavored to act in full transparency, and in compliance with all customs and regulatory requirements.”
* INVESTMENTS, BRANCH IMPACT
Pernod claims that tax disputes in 1994 have made doing business difficult.
The company wrote to Prime Minister Narendra Modi 2021, stating that the “everlasting litigation” had been a major strain on their ability to do business. It also hindered new investment from our Paris-based group for India’s expansion.
Pernod said it was in contact with Indian officials as it seeks to find a quick resolution.
Pernod sent a July 2022 letter to the federal tax agency informing them that it faced “significant business continuity problems” and that its supply chains were being choked by operational difficulties.
* HIGH IMPORT TXES
India’s alcohol market has strict regulations. Pernod, like many others in the sector, is concerned by the 15% tax on import liquor.
The company called on the government in April to reduce the tax that it claimed poses a challenge for Pernod Ricard’s ability to sell many of its beverages.
Pernod earned $2.4 billion from India operations between 2020-21. However, 79% of this was due to taxes and duties. This includes import, federal and state levies. The India net profit was $130 million for the year.
Arpan Chaturvedi, Aditya Kalra and Raju Gopalakrishnan report on the incident. Editing by Raju Guppalakrishnan
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