The Confederation of Indian Alcoholic Beverage Companies (CIABC) has said liquor sales have declined more than half in states that imposed heavy corona cess to raise revenue.
“The idea of various state governments to quickly make up for revenue deficit due to lockdown through heavy taxation on sale of liquor has back-fired,” the CIABC said here on Sunday.
According to data collated by the CIABC, states that imposed no or moderate Covid taxes (0-15 per cent) saw 16 per cent sales decline. But the states that levied over 50 per cent Corona cess saw 59 per cent sales fall.
Comparing May and June data, when liquor trade was reopened after six weeks of closure of liquor vends, the CIABC categorised states into three categories — states that imposed corona cess up to 15 per cent, those 15-50 per cent and others over 50 per cent.
CIABC Director General Vinod Giri said comparison of data for May and June with the year-ago months showed alcohol sales in the first category states fell 16 per cent, in the second 34 per cent and in the third 59 per cent.
“It shows tax increases most likely didn’t lead to rise in collection in absolute terms. In fact, sales recovery in June, when unlocking began, was stronger in states that imposed lower cess,” said Giri.
Alcohol, according to him, is not as price inelastic as many people think.
“While the governments’ desire to collect more taxes is acknowledged and understood, they must not raise taxes beyond a point after which decline in sales and consumer down-trading to cheaper options more than nullify tax hikes,” Giri said.
Tax hikes that pushed consumer price up 10-15 per cent were counter-productive and caused fall in tax mop-up, he said and hoped the governments would take note of the data and bring tax hikes down to moderate and sustainable levels, ideally below 10 per cent.