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Excise revenue, Covid-19, illicit liquor & measures
Saturday, 06 June, 2020, 08 : 00 AM [IST]
Nakul Pasricha
Introduction
Following the easing of restrictions in the recent phase of the nationwide lockdown, the most striking images across many states in India showed long queues outside liquor stores. Within a few hours, many states chose to close the shops and started thinking of measures to maintain social distancing including a hike in prices, home-delivery, and other options. The reopening comes when the states have been struggling with revenue amid the disruption because of lockdown.
 
Let us review all these options developments considering Covid-19 pandemic.

A) Importance of Excise revenue for state; post-GST implementation in India
Excise revenue from alcoholic beverages has always been an important source of own tax revenue for states in India. Post-GST implementation, its significance has increased as revenue from state Excise (from alcoholic beverages) and stamp duty and registration fees (mainly levied on sale of the property) are now the major sources where state governments have autonomy to levy taxes. If one were to exclude SGST (rates of which are decided in the GST Council) from states own revenues, the share of state excise and stamps and registration fees in states own revenues have increased significantly, from around 20% to 40%, in the post-GST regime. While revenue is one of the key reasons states looking for reopening of shops, one cannot rule out the increase of illicit liquor trade during the lockdown. 
 
B)  Covid 19 & Illicit liquor 
Maximisation of government revenue is always a top priority on the agenda of the policymakers. However, when the matter relates to Excise policy, extra precaution must require considering the health and well-being of the citizens. During the Covid-19 lockdown, there has been a spike in crimes related to liquor making Excise officials busy preventing illicit liquor trade. Fraudsters have some ingenious methods of making, smuggling liquor. For example, many people started making liquor from hand sanitisers.
 
According to Delhi Police data, they have arrested 155 people in 147 cases under the Excise Act and 18,556 bottles of liquor recovered in the first two weeks of April during the ongoing lockdown. In Kochi, cops have seized over 8,500 litre of spirit in multiple raids, 900 cartons of illicit liquor were seized on way to Bihar, and many more.

In Hisar, officials have seized over 2 lakh liquor bottles during the lockdown period. These are a few mere examples. There is always a risk of human life-consuming illicit alcohol. According to various media reports, over 250 persons died in India because of hooch tragedies in the year 2019. As per the World Health Organization (WHO) estimates, harmful alcohol consumption resulted in over 3 million deaths in 2016, and most of these deaths occur in low- and middle-income countries.
 
C) Measures 
The key challenge is to create a fine balance between optimisation of revenue while giving proper weight to social consideration and ramifications. Worldwide experts recommended increasing taxes for SIN products as one the important element to reduce consumption and to enhance revenue. Policymakers face vehement opposition to raising taxes on alcohol and other SIN products from producers and their allies who persistently raise concerns about the impact of tax increases on revenues, employment, illicit trade, and the poor. However, evidence from around the world shows that these arguments are false or exaggerated and none justify inaction. Taxes and prices can have a major impact on curbing this illegal trade but need to be supported by strong governance and high-level security.

With increased pricing, the home delivery option can achieve multiple benefits, if implemented with a proper balanced socio-economic policy. A technology-enabled home delivery solution can promote the responsible consumption of alcohol. One needs to ensure that what I am getting is genuine. Already over 22 States Excise are using anti-counterfeiting solutions, ensuring liquor authenticity. These solutions can be easily upgraded with digital authentication solutions ensuring consumer participation in authentication at the point of delivery.   
 
D) Conclusion
It could be a good opportunity for the government to engage consumers in authentication process. The new generation Phygital Tax Stamps with technological innovation in security printing, serialised coding, data processing, and mobile communications can be into sophisticated devices with additional roles that related to product authentication, supply chain security & data intelligence. If the government can make a mechanism and ensure consumer participation in authentication at the point of delivery, it will be a game-changer.

(The author is the president of Authentication Solution Providers Association (ASPA), New Delhi)
 
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