Delhi scraps 70% "special corona fee" on liquor sales

The Delhi government has decided to withdraw the 70% “special corona fee” that it imposed upon alcoholic beverage sales from May 5.

The Aam Aadmi Party took the decision at a special cabinet meeting chaired by chief minister Arvind Kejriwal. However, it also increased VAT from 20% to 25% on all beers, wines and spirits.

Liquor tax is one of the leading revenue sources in the Indian capital. The government had set a revenue projection of Rs 6,279 crore ($830 million) from excise duty on alcohol for 2020-21, which amounted to 14% of total revenue projections.

India imposed a nationwide lockdown on March 24 in a bid to halt the coronavirus spread, and alcohol sales were banned across the country. Liquor stores reopened on May 4, sparking mile-long queues outside some shops.

On May 5, the National Capital Region government imposed a “special corona fee” set at 70% of the maximum retail price.

It revealed that the fee earned it Rs 209.3 crore between May 5 and June 6. Just Rs 304 crore worth of liquor was sold. 

The Confederation of Indian Alcoholic Beverage Companies said that the “special corona fee” caused a 58% year-on-year decline in the alcohol sales, as it became unaffordable for many people living in Delhi NCR.

"We welcome the decision of the government to remove the 70% fee in Delhi,” said CIABC director general Vinod Giri. “We had repeatedly pointed out that such a steep increase will turn out to be counter-productive as it would lead to a fall in liquor sales and government revenues.

“We are indeed very pleased to note that the government has responded promptly and appropriately to remove the cess and substitute it with a tax increase, which is reasonable and within our recommendations.

“This once again demonstrates that the government is alive and sensitive to the interests of the state, industry, trade, and consumers and has the courage to take prompt action in the interest of all the stakeholders.”