The Congress in Kerala on Thursday, November 24, termed the Left government's decision to hike sales tax on Indian Made Foreign Liquor (IMFL) and forgo the five per cent Turnover Tax (ToT) levied on distilleries as "corruption" and said it could lead to increase in drug use. The criticism comes a day after the state cabinet approved a four per cent increase in the general sales tax on IMFL.
Leader of Opposition (LoP) in the state assembly V D Satheesan said the state government's decision was not only "unscientific", but it would also lead to an increase in liquor price which in turn could push more people towards drug consumption.
Moreover, there are those who would not cut down on alcohol consumption irrespective of the rise in its price and therefore their household expenses would be affected by the latest decision.
Senior Congress leader Ramesh Chennithala dubbed the state government move as "corruption" and said it was an outcome of a mutual understanding between liquor companies and the ruling CPI(M).
Speaking to reporters in Thiruvananthapuram, he said liquor companies have been for years demanding doing away with Turnover Tax, which is imposed by the state government on the distilleries in Kerala.
Therefore, the state government decided to forgo the five per cent Turnover Tax (ToT) levied on distilleries, which are manufacturing and selling foreign liquor within the state.
At the same time, the state government also decided to increase the sales tax on liquor by 4 per cent. Satheesan claimed that the sales tax was increased to make up for the loss of revenue of around Rs 1500 crore due to forgoing the Turnover Tax of 5 per cent. As a result, the sales tax on IMFL will increase from 247 per cent to 251 per cent, he noted.
The LoP termed the decision as "daylight robbery" and said it would be a blow to the consumers and beneficial to the liquor companies.
He contended that frequent hike in liquor prices to tide over the financial crisis allegedly caused by government extravagance and mismanagement of tax collection was a 'flawed' economic practice.
Satheesan also sought an investigation into the allegations that CPI(M) leaders intervened on behalf of big liquor companies to exempt them from ToT.
A cabinet meeting on Wednesday chaired by CM Pinarayi Vijayan decided to do away with the Turnover Tax on distilleries and increase the sales tax on liquor. It also gave its nod to the Kerala State Beverages Corporation to increase its warehouse margin by one per cent.
It was also decided that the price of foreign liquor will be increased by 2 per cent for customers.
The waiving of ToT on distilleries would result in loss of revenue to the southern state and to cover that, the present Kerala General Sales Tax rate would be increased by four per cent, a CMO statement had said.
"For that, a Bill will be presented in the Assembly to amend the Kerala General Sales Tax Act, 1963,'' it had said.