Kerala has become the latest state after Andhra Pradesh, Delhi, West Bengal, Rajasthan and Karnataka to announce a Covid cess on liquor. The Kerala Cabinet, which met on Wednesday, decided to hike liquor prices by 10-35%.
The state government will soon come out with an ordinance on the hike, sources close to the chief minister’s office said. Currently, liquor attracts 100-212% tax in Kerala. The Covid cess of 35% and 10% will be clamped on IMFL and beer, respectively.
The state collected only about Rs 200 crore tax revenue in April. It is a measly 6% of the monthly target of Rs 3,500 crore. Against S-GST of Rs 1,766 crore collected in April 2019, collection in the previous month was just Rs 161 crore.
Although liquor sales is often seen as price-inelastic in Kerala, the Bevco chief hesitates to forecast that the price hike would help in pepping up the annual sales revenue this time. “Since Kerala had its own lockdown from March 13, liquor sales were impacted for nearly 90 days. At best, the price hike may help make good the annual turnover to a certain extent,” said Sparjan Kumar, MD of Bevco.
The Kerala government-run Bevco adds a slew of mark-ups, including excise duty, sales tax, gallonage fees, its own profit and operational costs, before pricing liquor that is sold from its outlets. It had been losing revenues of Rs 40 crore per day through the prolonged lockdown.
Despite the posse of taxes, Bevco notched Rs 14,508-crore annual turnover in 2018-2019, Rs 1,568 crore higher than the previous year. Even after devastating floods in 2018, Bevco had sold 216.34 lakh cases of IMFL and 121.12 lakh cases of beer that year. The levy of flood cess for 100 days had brought an additional revenue of Rs 309.9 crore.
Although there will be a virtual queue system at Bevco counters to keep social distancing effective, there will be restrictions on the quantum of purchase. A buyer can buy up to three litres of IMFL or beer.
Besides 300 Bevco outlets, Kerala has 598 bars and 357 beer-wine parlours, many of these in the private sector. They will also come within the ambit of the permission to sell takeaway liquor.