The Bihar government stands to lose upwards of Rs 4000 crore in revenue annually following Tuesday’s cabinet decision to enforce complete liquor ban in the state.
This means, the government’s bid to shore up Rs 29,730 crore in current fiscal year 2016-17 would take a big hit as there would be a big shortfall from excise and related VAT on liquor products.
Chief minister Nitish Kumar, however, did not attach much importance to the revenue loss, saying that governance does not mean revenue earning. He said, his government was ready to forgo tax earning from liquor, which impacts negatively on society.
“We have imposed complete ban for a social cause to create an alcohol-free environment. Revenue loss is not our consideration. We can earn revenue from other sources,” he said, when asked to comment on the losses to be incurred from the complete ban on IMFL (Indian Made Foreign liquor) that was allowed in urban limits from April 1.
For the government, the excise department has been a cash cow in the last one decade when the government pursued a liberal liquor policy, allowing opening of around 6000 shops (both IMFL and country liquor) leading to revenue rising from Rs 319 crore in 2014-15 to Rs 3605 crore in 2015-16 (last fiscal year).
Going by the revenue projections, it was estimated that the government would lose Rs 4000 crore once the total ban comes into force.
But the initial government’s decision to allow IMFL shops to run in urban limits by opening 656 shops managed by Bihar State Beverage Corporation Limited (BSBCL) had kept room for earning Rs 2000 to Rs 2200 crore from sale of IMFL.
Now, this option of revenue is closed as excise department would not have any business with liquor trade from now, throwing a challenge for the government to shore up internal revenue from other sectors, be it commercial taxes, transport and registration.
Though the government has kept a target of generating Rs 29730 crore with sales tax likely to earn Rs 13,700 crore (47% of the total tax revenue), there are chances that the collections would be far less.
In broad terms, the government would now be more dependent on central funds and faces the challenge of shoring revenue by checking tax evasions by traders in VAT and check undervaluing of property to pay low stamp duty on land and flat registrations.