Delhi bans AB InBev for three years over tax evasion

The world’s largest brewer, AB InBev, has been banned from selling its products in the Indian capital for three years after authorities found that SABMiller, which AB InBev acquired in 2016, allegedly committed tax evasion.

As reported by Reuters, in early July following a three-year investigation, officials in Delhi found that SABMiller had committed tax evasion, using duplicate barcodes on beer bottles stocked by retailers in the city, allowing the company to pay a lower rate of tax.

Responding to the news on 30 July, AB InBev told the publication it denied the allegations put forward by the Delhi government, and will appeal the decision.

A spokesperson from AB InBev said in a statement: “We deny the allegations set out in this order and look forward to presenting our views in full cooperation with the excise appellate process. We look forward to receiving a fair hearing on this matter.”

City authorities filed their first order on 16 July in which they stated in a 19-page document that: “The barcodes were being duplicated by … SABMiller and supplied to the retail outlets to evade payment of excise duty.”

In another later filing, officials said AB InBev would be put on a “blacklist” for three years, calling for two of the company’s warehouses in Delhi to be sealed – Reuters was told by a senior official earlier this week that this had been completed.

The official told the publication that no new AB InBev stock could be sold at shops and restaurants, while the company is “debarred” from the Delhi market “for all purposes”.

AB InBev’s US$79 billion deal to acquire SABMiller was completed in October 2016. In order to comply with competition regulations, the brewer was required to offload many of its and SABMiller’s brands including Grolsch, Peroni and Snow beer.

Releasing its half year results last month, AB InBev revealed that its volume growth over the last three months has been its strongest in over five years, with profits rising 14% to US$2.47 billion between April and June, while beer volumes also grew 2.1%.

Also in July, the brewing powerhouse announced the sale of its Australian subsidiary, Carlton & United Breweries, to Tokyo-headquartered Asahi in a deal worth AU$16 billion. The proceeds from the deal will be used to pay off AB InBev’s debt, mostly accrued through the purchase of SABMiller.

AB InBev also decided not to pursue a planned US$9.8 billion initial public offering of its Asian business, but hinted in a statement about the sale of Carlton & United Breweries, that the deal may not be completely off the table.