Alcohol economy during the lockdown

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The truth about alcohol tax

Alcohol economy tax is a very interesting thing to ponder upon Ideally, you’d never want the people of your country to drink very frequently because it is very harmful to their health. No country’s government would want the citizens of its country to be unhealthy and sick people. Again, if people get ill, then it increases the pressure on healthcare. System and it becomes more expensive for the government to maintain the healthcare system if more people fall ill.
Still, there was so much demand for alcohol, that some governments decided to impose a 70% tax on alcohol during COVID lockdown. This is so why the alcohol economy was highlighted during the lockdown.

Image source – Google | Image by SUSHMITA PATHAK

What was the need to open the liquor shops so soon during the COVID lockdown situation?

I am gonna explain you all of this in this article.
The first thing that you have to understand is that today, due to the lockdown, all the states across the country are going through a massive financial loss. There is a desperate dearth of money in all the state governments

Take a look at this chart to understand why this is so !

How States get their resources

chart created with amCharts | amCharts

Sources of states’ own tax revenue

Based on data for FY18 to FY20

(This chart explains the avenues through which money goes to the state governments)

Where does the state earn from?

46% of the money comes from the taxes of the state government itself which is imposed on the people living in the state. And look at the breakdown of the 46% revenue that comes to the state government. 40% of the money out of this 46% comes from State GST

  • State GST
  • VAT(Value Added Tax)
  • Excise duty
  • Property transactions

GST(Goods and Services Tax)

Whenever any goods or services are used, then the state GST is collected from there. Now, what has happened in the lockdown? The use of products and services has declined because people are staying inside their homes. The goods are not being sold. Businesses have shut down. So there has been a steep decline in state GST collection.

VAT(Value Added Tax)

21% of the entire tax collection accrued by the state government comes from the taxes imposed on petrol and diesel. There is a big contribution to petrol and diesel in the state government. In the lockdown, cars are not plying and the demand for petrol and diesel is at an all-time low. Hence no money is coming from this sector too.

Excise duty

Excise duty imposes on liquor. It has a contribution of 12% only of the alcohol tax. Prior to these shops opening, there was no money coming from here too.

Property transactions

A property transaction is on the fourth spot for earning by the state government. This wasn’t happening either, owing to the lockdown.

COVID Lockdown effects

5% to 6% of the money comes from taxes on vehicles. There weren’t many sales of vehicles either. Some reports have shown that there were zero sales of cars in the month of April. No one was going to buy cars due to Lockdown. All these avenues dried up and money stopped coming in from them due to the lockdown. The revenue of all the states observed a loss of 80-90%.

For example,
the Chief Minister of Punjab said that he was expecting a sum of 3,300 crores as state revenue in the month of April but only 400 crores came in the month of April 2020. This is a direct drop of 87.8%. It is a severe loss.

This is the reason to open the businesses slowly and the lockdown is being withdrawn gradually. Because no government can bear such a massive loss. This is the reason why liquor was so focussed upon and the liquor shops were opened suddenly. This is the reason why the liquor stores have been opened up so soon in almost all the states. And some states have imposed an extra cess- an extra Corona Tax of 70%. So that more money can be collected by selling alcohol and so that the revenue loss can be compensated. So the people that are buying liquor today are literally saving the economy. This is making such a huge difference- This is not even a joke.

What is covid lockdown?

The lockdown has been announced across the world due to Corona virus as it has been declared an epidemic by the WHO.

Why is liquor being sold in the lockdown?

To save the country’s economy, liquor shops were opened and taxed up to 70%.

How long will the lockdown last?

No date has been fixed for this yet. However the lockdown can be increased until the corona virus is completely eradicated.

Crowd problem in front of liquor shop !

The problems with the lines(queues) was nothing short of chaos. The governments should start its home delivery to avoid the chaos. And some governments have commenced home delivery. Government must create a online portal for home delivery.

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