NEW DELHI:
Hit by the steep price increase in wine, beer and spirits due to COVID cess, consumers in many states are downgrading to lower-priced alcoholic beverages, according to a LocalCircles survey.
The survey found that the volumes of liquor sales in the states are falling as consumers say they are buying less than their usual quantity due to increased MRP. This phenomenon might lead to reduced tax collections for the states. The majority of consumers say they will order liquor through ecommerce apps if their state government allows.
The survey found that excise data in multiple states shows decline in sales volumes in May and June 2020, when compared with 2019.
Liquor is one of the biggest sources of revenue for the state Government. As the COVID-19 pandemic forced majority of businesses to shut due to the lockdown and reduced the tax collections, various state Government decided to impose a COVID surcharge/cess on liquor in their state in a bid to offset decline in revenue collection from other areas. Among all the states, Telangana, West Bengal and Rajasthan have seen a noticeable increase in prices of liquor in the last few months.
LocalCircles conducted surveys to better understand how this increase in prices due to COVID cess or surcharge is impacting the buying behaviour of the consumers in the states of Telangana, West Bengal and Rajasthan. The survey received more than 25,000 votes from residents of Telangana, West Bengal and Rajasthan.
Citizens were asked because of the COVID cess imposed by Government of their state on alcohol, will they consider downgrading to a cheaper alternative alcoholic brand or product in the coming months to stay within their budget. In response, 55 per cent residents of Telangana, 50 per cent residents of West Bengal and 49 per cent residents of Rajasthan answered in an affirmative.
In the last 6-7 months, taxes on liquor in Telangana have been increased by around 40 per cent, leading to a sharp increase in the liquor prices in the state. In May, when the liquor shops were reopened after the lockdown, a tax increase of around 16 per cent was imposed on the sale of liquor in the state.
In West Bengal, more than 1.4 crore cases of hard IMFL and around 80 lakh cases of beer are sold annually. The large number of alcohol consumers ensured that the state earned nearly Rs 11,000 crores in taxes on liquor sales last year.
With the COVID-19 pandemic forcing majority of businesses to be shut due to the lockdown and reducing the state tax collections, West Bengal Government decided to impose a 30 per cent COVID-19 sales tax on liquor in the state in a bid to collect more revenue.
In Rajasthan, the government decided to impose a COVID surcharge on liquor in the state in a bid to collect more revenue. The price increase was up to Rs. 30 per bottle. Overall, it comes to taxes on liquor being increased by over 30 per cent in the last 6 months.
