Virendra Nath Bhatt

Lucknow.

UP government witnessing large deficit in revenue collection amid the nationwide lockdown, is now mulling to impose the COVID tax on alcohol. This could be in the form of hike in excise duty or the imposition of VAT on alcohol. UP collected a monthly average amount of Rs 2,500 crore from liquor during the last fiscal 2019-20 and the states hopes to collect average monthly revenue of little over Rs 3,000 crore.

On all India level UP is the top earner from the excise duty on alcohol, followed by Karnataka, Maharashtra, West Bengal and Telengana. During the last fiscal 2019-20 UP government collected Rs 29,403 crore from excise. For the current fiscal 2020-21 , the state government has targeted to collect Rs 37,500 crore.

The issue of hike in price of alcohol is likely to be placed before the cabinet soon. One reason as to why UP collects the highest tax on alcohol is that it levies only excise duty on manufacture and sale of liquor. It does not collect VAT separately unlike states such as Tamil nadu.

The principal secretary excise Sanjay Bhoosreddy on Monday had said that right now there is no proposal before the government to hike the tax on alcohol. However on Tuesday the excise department official held marathon meeting to work out the issue. No formal announcement was made by the excise department on Tuesday.

Official sources however said that the Delhi government on Monday by imposing special corona fee on alcohol thus hiking the price by  hefty 70 percent has created domino effect like situation and left the neighbouring states to follow suit. Besides neighbouring other state are also in the process of hiking the tax and Andhra Pradesh has hiked the price of alcohol by 75 percent on Tuesday. Sources said if the price of alcohol is not hiked in UP, then it would lead to rampant smuggling to Delhi. They said it is for the first time in several decades that the India made foreign liquor in Delhi is costing more than UP.

Liquor contributes a considerable amount to the exchequer of all states and union territories except Gujarat and Bihar, both of which have enforced prohibition. Generally states levy excise duty on manufacture and sale of alcohol. Some states also impose VAT and states also charge special fee on imported foreign liquor, transport fee and label and brand registration charges.

A few states such as Uttar Pradesh have imposed special duty on liquor to collect funds for special purposes such as maintenance of stray cattle’s. UP government in January 2019 had imposed a special cess on Indian Made Foreign Liquor (IMFL) and Beer to fund stray cow shelter homes, grazing grounds and other cattle protection-related activities in the state. The government had estimated to raise additional revenue of Rs 155 crore annually by imposing a special fee on excise.