Kerala hikes tax on foreign liquor, tobacco products

Raises water charges 50 per cent, no change in tariff for BPL families

The Kerala government today decided to raise tax on Indian-made foreign liquor (IMFL), including beer and wine, to tide over the financial crisis.

Accepting most of the recommendations of the report submitted by additional chief secretary KM Abraham, a Cabinet meeting decided to raise tax on cigarettes and other tobacco-laden products.

The duty imposition on IMFL will now be 135 per cent after including the 20 per cent hike in the tax and a five per cent additional cess.

The state government plans to generate an additional Rs 1,130 crore by raising the tax on foreign spirits. The new tax rate for beer and wine at 70 per cent, up from the existing 50 per cent, would generate an additional Rs 100 crore revenues.

Announcing the decisions, chief minister Oommen Chandy said the tax on cigarette and other tobacco-based products would be 30 per cent, as against the existing 22 per cent.

Chandy said the additional cess collected from the sale of foreign spirits would be utilised to rehabilitate employees of bar hotels and beverages outlets.

Kerala, which charges one of the highest tax rates on IMFL in India, mobilises Rs 7,500-8,000 crore annually from its sale at the outlets of Kerala State Beverages Corporation (Bevco) and Kerala State Co-operative Consumers Federation (Consumerfed).

The existing sales tax on foreign liquor is 115 per cent.

Water to cost 50 per cent more
The state also has raised tariff on piped drinking water 50 per cent. Consumers will now have to pay Rs 6 per kilolitre water, up from the current Rs 4. The Cabinet, however, had insulated the below poverty line families who consume a monthly 10,000 litres.

This was, however, lower than the Kerala Water Authority (KWA)-recommended 100 per cent hike applicable to all consumers.

Chandy said the fee for various government services will also be increased, except for education services.

A 50 per cent hike will be imposed on the fee for government services in the range of Rs 10-1,000. For services charged in the range of Rs 1,000-2000, the increase is 25 per cent and it is 15 per cent more for fee above Rs 10,000.

The government also decided to increase the fair value of land across the state that was determined almost a decade ago. The fair value of land is expected to go up 20-30 per cent from the current level.

The Cabinet meeting entrusted a sub-committee of ministers to submit a detailed report on the hike in fair value. There is also a proposal to impose additional taxes on those who have more than one car and luxury villas. Land taxes will be hiked in the range of Re 1 to Rs 8 for each cent in village, municipal and corporation levels. In order to reduce the burden on the exchequer, the Cabinet decided to wind up the services of temporary workers in various projects, which were already completed. However, permanent employees would be re-deployed in other departments.

The government will be stringent on foreign tours of ministers, government delegations and officials. Overseas tours will be allowed on issues of utmost priority, the chief minister clarified.

Meanwhile, Opposition parties have put up a strong protest against the decisions, especially over the hike in drinking water tariff. Opposition leader VS Achuthanandan said strong agitations would be organised against the decisions.

He said the present financial crisis in the state was due to wrong policies of the government and on mismanagement of financial affairs.