The steep Covid-19 tax on liquor is forcing Indians to switch to cheaper brands

Image: AP Photo/Channi Anand
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India’s coronavirus lockdown resulted in an unintentional 45-day prohibition.

Once the liquor vends were allowed to open in May, Indians threw all pandemic-related caution to the wind and decided to queue up and stock up on alcohol. This prompted many states, including Delhi, Odisha, Rajasthan, West Bengal, and Telangana, to announce a “coronavirus cess,” a huge markup that was to be paid over and above state taxes.

While it may have helped get rid of the snaking queues, this steep tax has suppressed the demand for liquor. Though Delhi did away with the 70% additional Covid-19 tax on June 7 and Odisha reduced it from 50% to 15%, some other states have kept these taxes as high as 40%.

Now, Indians are willing to switch to cheaper brands and variants, according to a survey by LocalCircles, a community-led social media engagement platform. The survey results were based on responses from 17,800 participants.

Others, such as residents from the state of Rajasthan, say they are likely to buy more alcohol should the state do away with its Covid-19 cess. On an average, India’s states and union territories collected about Rs15,000 crore ($2 billion) in monthly taxes from the sale of liquor in 2019.

A loud chorus also appears to be gathering around the online deliveries of alcohol.

Currently, because the sale of alcohol is under each state’s jurisdiction, it is up to that state’s government to allow this. Some states, such as Maharashtra, Tamil Nadu, and Chhatisgarh have already created mechanisms for home deliveries. Food delivery platforms Swiggy and Zomato have obtained permission for delivering alcohol in the eastern states of Jharkhand and Odisha.

The Covid-19 lockdown and restrictions have been a huge blow to India’s liquor industry, as well as the states’ revenue collection. In Odisha, for instance, liquor producers repeatedly appealed to the government to reduce or eliminate to Covid-19 fee, before the state government finally obliged. States like West Bengal have earned over 90% less tax revenue than 2019 from the sale of alcohol in June this year.