Why states are eager to open liquor shops??

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Representative Image, Photo by Tembela Bohle on Pexels.com

Lockdown due to the coronavirus pandemic has adversely impacted the revenue of the state and central governments. Bulk of it is contributed by tax revenue on the sale of alcohol. Along with major industries, all liquor shops around the country were also closed down in the lockdown.

Trapped in shortfall of revenue sources and increased spending for curtaining Coronavirus, governments got little breather in the form of relaxation of lockdown. During the easing of lockdown, most of the states requested the central government to allow the opening of liquor shops; to which the central government granted. 

The Internet was creating buzz with images of people in large queues to buy alcohol in front of liquor shops on lockdown relaxation. No preventive measures such as social distancing were taken.This has forced states to start the home delivery of alcohol. Most of the states around the country have partnered with Swiggy and Zomato for this purpose.

The opening day revenue from the sale of alcohol has been many crores of rupees in many states.

What makes alcohol sales attractive to the government? 

Well, excise tax is levied on the sale of alcohol by the respective state governments. The states have their own approach towards collection of tax on the sale of alcohol. Some states like Uttar Pradesh impose special tax on liquor for special purposes. Generally, tax collection on sale of alcohol accounts for 10-15 percent of tax receipts for most of the states.

Tax on sale of alcohol is not included in the purview of GST. In fact, many of the states requested the central government not include it in GST when the major tax reform happened.

States are eager to open liquor shops as it is a major source of revenue for them. Especially during these times, when the state is incurring additional expenses due to the coronavirus pandemic and most of other revenue sources being dried up, they would want to open liquor shops so that they use the revenue generated to fight the invisible enemy- coronavirus and to support the poor sections of our society.

The states and Union territories collected a total of 1.76 trillion rupees through tax sale on liquor in 2019-20. There has been an increase of 16.5% when compared to the revenue generated in 2018-19.

Several states like Delhi and Andhra Pradesh have increased the tax on sale of alcohol by 75% to generate more funds to fight against coronavirus. More states are expected to follow them so as to generate more funds during these uncertain times.

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