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Business News/ News / India/  Tax on liquor, petrol, diesel hiked in Delhi, other states. 10 points

NEW DELHI : Struggling with low revenues during lockdown, several states have increased taxes on alcohol and fuel during lockdown. In Delhi, the Arvind Kejriwal government not only imposed a 70% 'Special Corona Fee' on liquor but also raised value added tax (VAT) on both petrol and diesel. As a result, petrol price in the national capital was hiked by 1.67 a litre on Tuesday and diesel by a steep 7.10 per litre. With the hike in VAT on auto fuels, the Delhi government expects to raise an additional over 900 crore annually.

10 things to know about tax hikes on liquor and fuel:

1) While fuel was always kept out of the purview of lockdown as an essential commodity, liquor sale is being allowed in some areas only since yesterday.

2) In Andhra Pradesh, the government has hiked liquor prices by 75% in 2 days. It is estimated that the fresh hike could fetch an additional revenue of about 11,000-Rs12,000 crore per annum to the cash-starved state government. The entire liquor business in AP is controlled by the state government through its own retail outlets, numbering 3,468.

3) Andhra government said that the decision to hike rates has been taken as a step towards "discouraging alcohol consumption".

4) Haryana Deputy Chief Minister Dushyant Chautala said they plan to levy a special Covid cess of anywhere between 2 to 20 on liquor. Haryana has been suffering monthly revenue losses of 6,000 crore due to the coronavirus-triggered lockdown.

5) In Uttar Pradesh, the state government estimates that liquor worth 100 core was sold yesterday, a jump of around 20-30%. UP's Principal Secretary, Excise, Sanjay Bhoosreddy said: "I don't think there would be any single industry with just less than one lakh work force that gives 100 crore revenue (to the state exchequer) in a day."

6) Tamil Nadu government will be beefing up its revenue with the increase in value added tax (VAT) on petrol and diesel by 2,500 crore. According to the state government the VAT increase has resulted in a retail price hike of 3.25 per litre of petrol and 2.50 per litre of diesel.

7) Haryana government has also hiked tax by Re 1 per litre on petrol and 1.1 per litre on diesel to support revenues.

8) Other states like Maharashtra, Karnataka and West Bengal had hiked VAT from April 1. Since March 16, state-run oil marketing companies have not increased the basic retail selling price of petrol and diesel.

9) Rajat Bose, Partner, Shardul Amarchand Mangaldas & Co, said tax on liquor is a low hanging fruit at the moment for state governments to garner revenue which have otherwise dried up in light of the economic lockdown. "Given the massive queues in front of liquor shops since yesterday, the state governments can hope for a robust collection of taxes in the immediate future which can be channelized for funding the growing demand for testing and health care services during these times," the tax expert said.

10) Saloni Roy, Senior Director, Deloitte India, said the Delhi government earns bulk of its revenue from sale of petroleum and alcohol. "New levies that have been introduced by state governments are essentially measures to make up losses they have incurred and also curb crowds at alcohol stores," she said.

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Updated: 05 May 2020, 05:00 PM IST
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