Uttar Pradesh, Karnataka and Tamil Nadu on Wednesday hiked the tax on liquor as revenues dwindle in light of the coronavirus-induced lockdown. The hike in excise duty was 11 per cent in Karnataka and 15 per cent in Tamil Nadu, while tipplers will have to shell out between Rs 10 and Rs 400 more for a bottle in UP.
Along with liquor, the UP government also hiked the tax on petrol and diesel, a move it expects will bring in additional revenues of Rs 4,420 crore during the current fiscal year (FY21 ).
Since, the tax application on the petrol and diesel does not fall under the purview of goods and services tax (GST) , states enjoy considerable leverage in imposing such taxes at the local level.
In UP, the decision was taken at the Cabinet meeting chaired by Chief Minister Yogi Adityanath.
Talking to the media later, UP Finance Minister Suresh Khanna said following the lockdown in March, the financial situation of the state had come under stress owing to falling revenue collection, especially taxes.
“Against the tax demand of Rs 12,141 crore in April 2020, the tax mop-up of UP stood at merely Rs 1,178 crore, which is a massive dip in net collections. This has made the overall financial situation tight for the state,” he said, adding the state was forced to explore additional sources of revenue to fill the gap.
The state has hiked the prices of petrol and diesel by Rs 2 per litre and Rs 1 per litre, respectively. The per litre rates of petrol and diesel are currently Rs 71.91 and Rs 62.86, respectively, have been raised to Rs 73.91 and Rs 63.86, he said, adding the hike in fuel prices would bring additional revenue of Rs 2,070 crore during the current fiscal year.
“We have not increased the diesel prices beyond Rs 1 per litre, since it is commonly used in the state farm, transport and industrial sectors,” Khanna added.
Last year, the total consumption of petrol and diesel in UP stood at 470 crore litre and 1,130 crore litres respectively.
In Karnataka, the hike is in addition to the 6 per cent that was announced in the Budget. "We have increased the excise duty by 11 per cent. Other than this during the budget also the excise duty was increased,"Chief Minister B S Yediyurappa told reporters.
The hike would come into effect in a couple of days as labelling and other procedures would require time, he said.
"Yes, this 11 per cent is in addition to the six per cent announced in the budget," the Chief Minister added.