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Hefty corona cess by states halves liquor sales: CIABC
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SME Times News Bureau | 03 Aug, 2020
The Confederation of Indian Alcoholic Beverage Companies (CIABC) has
said liquor sales have declined more than half in states that imposed
heavy corona cess to raise revenue.
"The idea of various state
governments to quickly make up for revenue deficit due to lockdown
through heavy taxation on sale of liquor has back-fired," the CIABC said
here on Sunday.
According to data collated by the CIABC, states
that imposed no or moderate Covid taxes (0-15 per cent) saw 16 per cent
sales decline. But the states that levied over 50 per cent Corona cess
saw 59 per cent sales fall.
Comparing May and June data, when
liquor trade was reopened after six weeks of closure of liquor vends,
the CIABC categorised states into three categories -- states that
imposed corona cess up to 15 per cent, those 15-50 per cent and others
over 50 per cent.
CIABC Director General Vinod Giri said
comparison of data for May and June with the year-ago months showed
alcohol sales in the first category states fell 16 per cent, in the
second 34 per cent and in the third 59 per cent.
"It shows tax
increases most likely didn't lead to rise in collection in absolute
terms. In fact, sales recovery in June, when unlocking began, was
stronger in states that imposed lower cess," said Giri.
Alcohol, according to him, is not as price inelastic as many people think.
"While
the governments' desire to collect more taxes is acknowledged and
understood, they must not raise taxes beyond a point after which decline
in sales and consumer down-trading to cheaper options more than nullify
tax hikes," Giri said.
Tax hikes that pushed consumer price up
10-15 per cent were counter-productive and caused fall in tax mop-up, he
said and hoped the governments would take note of the data and bring
tax hikes down to moderate and sustainable levels, ideally below 10 per
cent.
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