The Kerala government, which is ushering into prohibition in a decade, on Wednesday decided to further increase the tax on liquor and tobacco products. The decision to further tax the tipplers in Kerala came amidst the claim of the Congress government that it was ready to forgo the revenue from liquor business.
After the cabinet meeting, chief minister Oommen Chandy said the tax on Indian made foreign liquor would be increased from present 115 per cent to 135 per cent. Apart from that, the IMFL would fetch a cess charge of 5 per cent on retail price. This is expected to fetch an additional income of Rs 1130 crore to the state exchequer. Besides, the tax on beer and wine would be increased from 50 per cent to 70 per cent, a step that is expected to give an additional income of Rs 100 crore for the cash-strapped government. The tax on tobacco products would be go up from 22 per cent to 30 per cent, a chunk of it would be ploughed back for the treatment of cancer patients.
At present, the liquor business forms 22 per cent of the state’s revenue. As a first step to total prohibition, the government decided to close down 730 bars out of 752 ones. These bars used to give the government Rs 150 crore in a month towards various taxes. Although the decision is pending in the court, the state government expects to make a windfall as more tipplers would purchase their bottles from the state-run liquor retailer BEVCO. Liquor sales shows that increase in retail prices have not played a dissuading factor for boozers.
As part of austerity measures, the ministers would not take 20 per cent of their salary until the end of this fiscal. Restrictions would be imposed on foreign trips of ministers. The government has also increased water charges. An increase in land tax is expected to fetch Rs 78 crore, said Chandy.
Kerala government has been tottering on the verge of a severe financial crumble down for last few months. For the first time in last one decade, the state had gone for an over draft of Rs 100 crore early this month. Besides, the government sold 10-year securities to find Rs 500 crore as the exchequer came under stress in the wake of huge flow of money towards various welfare schemes during the Onam festival.
Kerala has already borrowed Rs 6,900 crore this financial year at a time the maximum ceiling on borrowing for this fiscal is Rs 14,000 crore. The government has raised concern over fall in tax collection, but there were not earnest effort to collect huge sales tax arrears. The state is yet to exploit the potential of taxing the granite quarrying sector.
Even as the chasm between revenue and expenditure has been growing, the state government has allowed higher secondary batches to schools disregarding the warnings from the finance department. The ban on liquor at 700-odd hotels is feared to hit the state’s booming tourism sector which has witnessed a business of Rs 24,000 crore last year. The tourism industry has already alerted the government about the adverse impact of the new liquor policy.