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When excise duty in Assam was hiked by 70% last year, the state government had anticipated a “huge revenue earning”. But the government is worried now. It has discovered that the revenue collection of the excise department had rather dipped by around Rs 200 crore in last fiscal, falsifying earlier predictions.
The sale of IMFL (India made foreign liquor) in Assam fell by 20.83% in last fiscal, resulting in decrease in revenue collection by Rs 152 crore as compared to the previous year. Similarly the dip in sale of beer has been by 39.31%, causing Rs 50 crore revenue loss for the state’s exchequer.
Apart from excise revenue, this downward trend in sale of liquor has also adversely affected the collection of sale tax on liquor in Assam.
Diversion of trade to neighbouring states and leakages in tax collection system could be the probable reasons behind the dip in excise revenue collection, feels the new BJP-led government in Assam. It has now proposed to constitute a committee to suggest rates of taxes; both under excise and VAT (value added tax) for liquor.
“It appears that this is a classic case to prove two points. First, mere increase in tax or duty may not always result in increase in overall revenue. Secondly, Northeastern region needs to have some kind of uniform tax structure to arrest trade diversion and leakages,” said Assam’s finance minister Himanta Biswa Sarma.
The Tarun Gogoi-led Congress government had increased the ad valorem rates on liquor by 70% with effect from June 1, 2015. That resulted into increase in maximum retail price by 25-30% across all liquor brands. In rupee terms, that tax hike led to price difference of popular brands from Rs1000 to Rs4000 per case; if compared with neighbouring states.
Sarma said the fall in sale of liquor could not be attributed to fall in consumption of liquor in the state. “It does not mean that the consumption of liquor has actually come down. It is obvious that to this extent that there has been trade diversion to neighbouring states and leakages in tax collection,” he added.
To check leakages in tax collection system for liquor, the budget presented by Sarma yesterday proposed to bring in some reforms in the system.
Collection of VAT on liquor would from now onwards be at the first point of transaction made in the state. At present, VAT on foreign liquor (made in India or imported) is collected at the point of sale to retail licensee.
“It is experienced that under the existing system, there is some scope for evasion of tax as sale of liquor by one bonded warehouse to another bonded warehouse is not taxable,” Sarma said.
With regard to excise duty collection on liquor, the existing Assam Excise Rules, 1945 will be replaced by new Assam Excise Rules, 2016. This will enable the state excise department to realise excise duty at the manufacturer level and to curb the movement of non-duty paid liquor within the state. There will be also penalty of 300% of the duty involved on defaulteRs
