Aug 14: In their enthusiasm to collect higher taxes, the State governments tend to ignore the negative social impacts, as was seen with the Andhra Pradesh government increasing prices by 75% after liquor sales were opened in early May during lockdown. The astronomical prices pushed consumption of sanitizers and increased liquor smuggling, obliging the government to relook at lowering the prices now, writes Subhash Arora who feels increasing taxes indiscriminately is counterproductive and should be avoided.
Encouraged perhaps by the myopic government of Delhi imposing a 70% additional levy in May 2020 on the Retail Price as Covid Tax, the Andhra Pradesh government took little time to levy Additional Retail Tax (ART) of 25% and increase prices by 50% taking the total price hike to 75% after lockdown norms were eased. The government might be an expert in the ART of raising taxes indiscriminately but it did not factor in people taking to sanitizers which are tempting for many addicts, with the alcohol content of over 60-80% as was seen in the recent deaths.
While the Delhi government recognised their short sightedness and rolled back the taxes, Andhra Pradesh continued with the ART, but are now reportedly considering removing the additional levies. The state government has increased the prices many times earlier too. The excise department however, has now sent proposals to the government for reduction of ART.
The state government’s decision, however, had some serious consequences. Addicts started consuming alcohol-based hand sanitizers, which are available cheaper than liquor. While deaths were reported across the state due to consumption of hand sanitizer,16 people died in Kurichedu due to consumption of sanitizers, highlighting the nature and extent of the problem. As might have been surely anticipated, liquor smuggling also shot up from the adjoining states. Controlling it has brought migraine to the police and the Special Enforcement Bureau (SEB). Officials now admit that the state was also losing revenue to other states.
Rajat Bhargava, special chief secretary for revenue, insists however, that the increase in prices of liquor was in line with the government’s policy to impose complete prohibition in steps and also to discourage people from leaving home during the Corona pandemic.
According to a report by TOI, the state government hopes to review the situation and there are chances that the ART may be reduced to pre-lockdown levels and the price difference in liquor procurement cost for wine shops and bars may also be reduced.
The market for wines is rather limited in Andhra Pradesh where Retail shops are owned by the state government. Sula and Fratelli are primarily the two brands available due to the system's peculiarities. To give a proper perspective, Sula Cabernet Shiraz which sells for under Rs. 800-900 in other parts of the country was selling for Rs. 1290 in Andhra Pradesh earlier but the prices were raised to Rs. 1860 after Covid Taxes. In the adjoining Telangana, it is priced at Rs. 1290. The sales in AP have been rather dismal and are not expected to pick up, according to our reliable source, unless the prices are brought more or less at Par with Telangana. It’s the liquor business that would benefit more with reduction in taxes and ATR.
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