Excise duty on alcohol: a major contribution to States’ revenue
Part of: GS Prelims and GS-III – Economy
- 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.