Tax hike sobered down liquor sales in Telangana, finds survey

V Rishi Kumar Hyderabad | Updated on July 17, 2020

Barring the first few days after the reopening of liquor shops after the Covid 19 lockdown, sales have subsided in the Telangana following a price hike.

According to a survey covering 8,500 respondents conducted by LocalCircles, about 55 per cent said they would consider downgrading to a cheaper variety of liquour in the coming months to offset the price hike announced by the State.

While Telangana has around 2,200 liquor shops, sales have taken a hit. A number of alcohol vendors have stated that they have managed to reach only 50 per cent of their usual business and attributed this drastic dip due to the steep increase in prices.

When consumers were asked if they would increase the quantity of alcohol purchased if the government repealed the surcharge or reduced it, 45 per cent said they would increase the quantities they buy.

Alcohol is one of the biggest sources of revenue for the Telangana Government which earned ₹10,000 crore through excise duty last year. With the lockdown forcing majority of businesses to shutter and with the drastic reduction in tax collections, the Telangana Government imposed a Covid surcharge on alcohol to collect more revenue. In the last six to seven months, taxes on wine, beer and spirits have been increased by over 40 per cent, leading to a sharp increase in retail prices for the end consumer.

Due to the nation-wide lockdown, there was temporary prohibition for about 45 days. The stores were opened on May 4 and the government imposed up to 20 per cent tax on alcohol in the state.

As per the survey findings, about 87 per cent of consumers of alcohol in Telangana are in favour of the e-commerce channel for buying liquor.

The Delhi government had levied a Corona Cess of 70 per cent on liquor but it was quickly rolled back after witnessing a reduction in alcohol sales. The Odisha government too recently lowered the Covid cess to 8 per cent from 50 per cent after experiencing a reduction in alcohol sales and a corresponding decline in excise revenues. While the Telangana government earned around ₹2,500 crores through excise duties, its strategy to try and earn more revenue by increasing prices may not be a long-term, sustainable solution.

Published on July 17, 2020

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