19 May,2011 06:59 AM IST | | Urvashi Seth
State's excise department is reaping the fruit of its own hikes liquor sales went down by 10 per cent in April this year compared to April 2010, sinking it in losses
After the upsurge in the taxes levied on alcohol, citizens may have decided to cut back on liquor a bit, inadvertently punishing the state excise department for heavily taxing drinks.
Almost three months after the Union and state budgets inflated the duty levied on liquor, the pinch is being felt, not just by revellers who have restrained their drinking, but also by revenue collectors, as was revealed in a meeting of the excise department last Tuesday.
Owing to the assorted taxes, liquor prices soared, which led to drinkers staying away from c. All divisions have witnessed a drop in sales this April by almost 10 per cent
According to a senior excise official, liquor sales for April went down by almost 10 per cent in each category as compared to the same period last year (see box). The reports prepared cite that this is an impact of the recent imposition of taxes.
"Beer, which tends to be a summer drink, witnessed a dip in sales. Beer sales are always high in both the city and the suburbs. However, this year sales have gone down by about 2 lakh litres as compared to last year," he said, requesting anonymity.
On Tuesday, the department met to discuss the losses it incurred, thanks to imposing the assorted taxes and consequently, driving liquor prices up, and liquor consumers away.
Senior officials concluded that all divisions have witnessed a drop in sales this April by almost 10 per cent.
"Officers raised concerns over the significant drop in sales figures for all categories of liquor.
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Many have appealed to the department to rethink the newly-imposed taxes, believed to be the prime reason for the decrease in sales figure," he said.
As reported by MiD DAY in their issue dated April 14, 'Govt to take over liquor wholesale?', the state finance ministry gave the excise department the responsibility to collect 42 per cent of the state's revenue, the highest target allotted among all its departments that contribute to generating the revenue.
This led the department to raise the excise duty, and implement the additional service tax on air-conditioned restaurants and bars.
Said another senior official from the department, "We are yet to know the exact reason for the drop in sales. Due to changes in the liquor laws, a lot of the liquor stock was not released as manufacturers were deciding new prices.
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This led to a shortage in the market, which might have affected the drop in sales." The government imposed a 25 per cent VAT on the MRP for liquor manufacturers and importers.
Meanwhile, graded restaurants and bars four stars and above have decided to impose a 20 per cent VAT on the client's bill. For local bars and pubs, the VAT stands at 5 per cent. Also, a 10.3 per cent service will be charged tax on air-conditioned restaurants.
Business flags
Federations of pubs and hotels are sounding the alarm bells over the augmented taxes, which they say will lead to if they haven't already shutting down of businesses, and wean more patrons away from alcohol-serving joints.
Said Sudhakar Shetty, president of Indian Hotel and Restaurant Association (AHAR), "Since the prices have increased, our member establishments have witnessed a drop in sales by almost 40 to 50 per cent.
Tipplers are now looking for alternative and cheaper means.
Due to the recent service tax on air-conditioned restaurants, the clientele has thinned in numbers. Government should reduce the taxes before the situation gets worse."
He further said, "The 10.30 per cent service tax mandated by the 2011 Union Budget on air-conditioned hotels serving liquor has already increased prices.
The new taxes have started affecting the business of permit rooms and will soon encourage bootlegging. More than 500 restaurants shut down in the past few years because of severely dwindling profits.
The hotel industry, which generates crores of rupees by way of VAT, licence fees and service charges for the government, will be unable to absorb this hike and this will affect lakhs of people employed in the business."
P N Menghani, president Beer and Wine Shop Owners Welfare Association, said, "Since the state has imposed service tax on A/C restaurants, we have seen a spurt in the sale of products that are cheaper and affordable. However, the sale is not up to the mark."
500
Number of hotels that have shut down in the past few years owing to dwindling profits
