The United Democratic Front government in Kerala has landed in a controversy over its budget proposal to sharply reduce the sales tax on Indian-made foreign liquor (IMFL) with low alcohol content. The development has led the Opposition Communist Party of India (Marxist) to accuse the government of intending to benefit a leading liquor manufacturer.
Presenting the revised for the current fiscal on Friday, Chief Minister V D Satheesan announced that alcoholic beverages with alcohol content between 0.5 percent and 10 percent v/v (volume by volume) would attract a sales tax of 120 per cent. Products with alcohol content above 10 per cent and up to 20 per cent v/v would be taxed at 175 percent. At present, all IMFL products in Kerala attract a uniform sales tax of 251 percent, irrespective of alcohol content.
Satheesan, who also holds the finance portfolio, relied on the previous CPI(M) government’s 2022-23 abkari policy, which had permitted the sale of low-alcohol beverages in the state. However, the tax structure for such products had not been revised then.
Senior CPI(M) leader and former Excise Minister M B Rajesh has accused the government of protecting “certain interests”, and claimed that the decision could “pave way for corruption”.
“Those who came to power after speaking against liquor are now making it more accessible, especially to the youth. By reducing the tax, the state will lose Rs 600 crore annually. Satheesan should make it clear whose interests he is protecting. He should tell the people how much he was paid,” Rajesh alleged.
Addressing the media, Rajesh claimed the tax cut would primarily benefit a particular company that had made a similar demand before the previous LDF government.
“The previous government allowed the sale of low-alcohol-content horti wine, made from local fruits, to help Kerala’s farmers. Though there was a demand to reduce the tax on horti wine, we fixed it at par with wine (86 percent). The Congress government has instead reduced the tax on low-alcohol beverages made from spirit. There is currently no issue with the sale of such beverages, but at a tax rate of 251 percent, it was not profitable for companies. Now the tax has been cut to 120 percent. This will have far-reaching consequences,” Rajesh said.
Joining the criticism, Opposition leader termed the tax cut “mysterious”.
“In the past, higher taxes were imposed on IMFL to curb liquor consumption. This wrong liquor policy will push the youth towards alcohol addiction. Even minor tweaks in liquor policy have triggered controversy in the past,” Vijayan said.
Meanwhile, Excise Minister and Congress leader M Liju sought to distance his department from the proposal.
“The excise department has taken no decision. The finance department has made a decision relating to sales tax. We have not taken any decision on the sale of low-alcohol-content beverages,” he said.
