Excise duty on alcohol: a major contribution to States’ revenue

Excise duty on alcohol: a major contribution to States’ revenue

Part of: GS Prelims and GS-III – Economy 

In News:

• Recently, the Delhi government announced a 70% hike in the price of liquor. 
• Delhi’s “special corona fee” on alcohol underlines the importance of liquor to the economy of the states.

Important value additions:

• Liquor contributes a considerable amount to the exchequers of all states and Union Territories. 
• It is the 2nd or 3rd largest contributor to the State’s revenue; GST is the largest.
• However, in Gujarat and Bihar, liquor sale is prohibited.
• Kind of charges/tax/fees States may levy on liquor:
  • Excise duty on manufacture and sale of liquor
  • Value added tax (Tamil Nadu)
  • Special fees on imported foreign liquor
  • Transport fee
  • Label & brand registration charges.
  • Special duty on liquor to collect funds for special purposes, such as maintenance of stray cattle (UP) 
• According to a report published by the RBI in September 2019, state excise duty on alcohol accounts for around 10-15% of a majority of states. 

Value added tax

It is a tax on the amount by which the value of an article has been increased at each stage of its production or distribution.