Liquor makers urge Bengal govt to reduce 30 percent sales tax

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Manufacturers of alcoholic beverages have urged the West Bengal government to reduce sales tax on liquor from the existing 30 percent to a “reasonable” rate, which will increase sales and help the state earn more revenue, an official said on Tuesday. In an apparent bid to shore up revenues in COVID-19 time, the state government imposed 30 percent sales tax on liquor and the new prices came into effect from April 9.

“The increase of sales tax on liquor by 30 percent on April 9 has led to drastic fall in sales, which resulted in lower collections for state exchequer,” the Confederation of Indian Alcoholic Beverage Companies (CIABC) said in a representation to the state government. Sales in April and May fell by 84 percent and 35 percent respectively due to high taxes imposed on liquor, CIABC director-general Vinod Giri said.

There is also sufficient empirical evidence that when prices are increased sharply, consumers prefer cheaper products, and hence, tax collection per bottle goes down, he said adding that steep increase in taxes may actually turn out to be counterproductive. “We humbly request you to reduce the increase in sales tax on liquor to a level, not more than 5-10 percent. We believe that with such increases the adverse impact on sales will be low, thus leading to higher tax revenues for the government, besides obvious benefits to the companies and the consumers,” Giri said.

He claimed that the Delhi government, after weighing the data presented by the association, decided to withdraw the 70 percent cess and replaced it with a “reasonable five percent increase” in VAT. Compared to the price of liquor in neighbouring states, it is on the higher side in West Bengal, which may lead to illegal trading of alcoholic beverages, Giri said.

“The difference in prices is now too wide and we apprehend that this will lead to a large scale smuggling of liquor thus affecting the genuine sales in the state and the government revenue,” he added.

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