COVID-19: Kerala to hike Excise Duty on Liquor

COVID-19 - Kerala to hike Excise Duty on Liquor - TAXSCAN

Amidst the struggles due to the COVID-19 pandemic, the Kerala State Government has decided to increase 10 to 35 percent of the excise duty to boost the economy.

The State cabinet on Wednesday decided to bring out an ordinance to the effect. Prices of both Indian Made Foreign Liquor and beer, concurrently taxed at 202-212 percent and 102 percent respectively, are expected to zoom.

Currently,80 percent of the tax is charged for foreign-made foreign liquor. Earlier, the State had wisely chosen to take a cue from some of its peers not to reopen the liquor vends and risk crowds, for fear of fuelling the virus’ spread.

Kerala State Beverages Corporation, a public sector undertaking that has a monopoly over wholesale and retailing vending of alcohol, levies tax, excise duty, and gallonage fees (excise duty per liter of methyl alcohol) on the purchase price and factors in operating costs and a profit while fixing retail prices.

The 2018-19 State Budget had waived surcharge, Social Security Cess, Medical Cess, and Rehabilitation Cess and had revised the existing sales tax rate structure.

Accordingly, the tax rate was fixed at 200 percent for liquor with a retail price of ₹400; 210 percent for those with a price tag of above ₹400; and 100 percent for beer. The 2019-20 Budget had revised these rates upwards by 2 percent. Wednesday’s decision to revise these further upward comes amidst criticism that politicians across the spectrum fall for the lowest hanging fruit and make merry milking indirect tax sources such as petrol-lottery-liquor tax sources. This, in turn, creates a ‘fiscal illusion’ in which the consuming public does not instantly feel the heat of the tax impost.