With the gradual easing of the lockdown, States and UTs are now gearing up for a battle on the fiscal front. And floored by the double-whammy of mounting Covid-related expenses and anaemic revenue flow, many have realised that they cannot afford to wait to bridge their yawning fiscal gap. In an early indication of things to come, the Delhi government on Tuesday said that it will levy a 70 per cent extra tax on liquor. The Arvind Kejriwal-led Aam Admi Party (AAP) government called the new tax “special corona fee”. The tax will be charged on the MRP on a per bottle basis.
In another decision, the Delhi government also increased the value added tax on diesel from 16.75 per cent to 30 per cent and on petrol from 27 per cent to 30 per cent. With the hike, diesel and petrol would cost ₹7.10 and ₹1.67 more a litre in the national capital.
The Andhra Pradesh government, which increased the price of liquor by 25 per cent on Monday, announced another hike of 50 per cent on Tuesday, taking the total increase to 75 per cent. On its part, the Tamil Nadu government had increased the prices of petrol and diesel by ₹3.25 and ₹2.50 per litre, effective Sunday midnight.
While the decision of the Andhra Pradesh government to hike the levy on liquor is also seen as part of its effort to go for a complete prohibition in the near future, Delhi’s enhanced tax is being viewed as a move to control the unruly crowds that have thronged the shops once the lockdown was relaxed.
“The Delhi government earns the bulk of its revenue from sale of petroleum and alcohol. The new levies that have been introduced are essentially measures to make up for the losses it has incurred and also to curb crowds at alcohol stores,” said Saloni Roy, Senior Director, Deloitte India.
Fuel under GST net
The increase in taxes by States/UTs, particularly on petrol and diesel, has also rekindled the debate on bringing fuel under the GST net.
Commenting on the over-dependence of States and UTs on revenues from petrol and diesel, Assocham said there is a strong case for national parity on fuel prices.
Said Deepak Sood, Secretary General, Assocham: “Industry has been seeking a bold stimulus package, including tax reductions, as it is reeling under the 42-day lockdown.
“On the contrary, if taxes are raised, the demand would be further depressed, giving a jolt to the economy.”
Meanwhile, the Delhi unit of the BJP has flayed the AAP government’s decision to hike VAT on diesel and petrol.
(With inputs from Delhi and Hyderabad Bureaus)