The Kerala government may follow the path of the Delhi government in charging Covid-19 cess on liquor sales. What makes the state dilly-dally over it is that alcohol already attracts 100-210% tax in Kerala.
“We are mulling all practical options to whip up state revenue in the cash-strapped predicament of fighting a pandemic,” state finance minister TM Thomas Isaac told FE when asked about Delhi, Andhra and Rajashtan slapping Covid “special fees” on liquor to address resource crunch.
Following the devastating flood in 2018, the state had collected a flood cess which had fetched Rs 308.68 crore to the state exchequer.
Excise minister TP Ramakrishnan said the Cabinet is yet to take a decision on imposing any cess on liquor.
Sparjan Kumar, MD of state-run Bevco, the monopoly distributor of liquor in Kerala, had last week send a circular to staff to arrange social distancing facilities at 300 outlets so that sales can start this week. The reopening too awaits the decision over pricing of liquor.
Liquor demand is price-inelastic in Kerala, as evidenced by the steady surge in annual sales in Bevco. For instance, Bacardi Classic Black rum, which Bevco buys at Rs 168, is sold at Rs 1,240. Royal Challenge whisky, procured at Rs 154 per bottle, is sold at Rs 1,170. Honeybee brandy is procured at Rs 53 and sold at Rs 560 per bottle. This price mark-up is because of tax layers – sales tax, excise duty, gallonage duty and other taxes – in addition to the net profit. Despite this, Bevco clocks around Rs 14,508-crore annual turnover.
Since arrack is banned in Kerala, even tiplers among underprivileged sections go for the costly IMFL (Indian made foreign liquor) sold on Bevco counters. This might explain the IMFL demand,” said public finance economist Jose Sebastian.