Govt dampens the spirit with move to tax liquor traders

Jul 06, 2016, 09:22 IST | Dharmendra Jore

Mumbai spared from Local Body Tax to be levied in 25 municipal corporations in the state; retailers warn the burden will be passed on to consumers

Nurse that drink — for as long as you can. For, liquor will soon cost more in Thane, Navi Mumbai, Kalyan-Dombivli and 22 other municipal areas in the state. The government has decided to recover a local body tax (LBT) from all traders, including those dealing with country-made and Indian-made foreign liquor.

The government has decided to recover Local Body Tax from all traders. File pic
The government has decided to recover Local Body Tax from all traders. File pic

The decision was taken by the state cabinet yesterday. The government did not specify the rate of LBT, but sources said it could vary between 10% and 15% as per the gradation of civic bodies. The date from which the regime will begin has not been decided yet either.

Mumbai Metropolitan Region, which has seven civic corporations, will be the most affected by the decision. Mumbai will not come under the new regime as the city still recovers octroi instead.

The government expects to increase the revenue of cash-strapped civic bodies with this move.

Making the cut
As per the tax reform, liquor traders whose annual turnover is less than Rs 50 crore have been asked to register in the LBT regime. This means that every restaurant/hotel that is licensed to sell alcoholic beverages and retail outlets that sell country-made and Indian-made foreign liquor will have to pay the LBT. The government had scrapped LBT last August for those traders in 25 municipal corporations, barring Mumbai, who have a turnover of less than Rs 50 crore.

LBT has been the largest source of revenue for these 25 municipal corporations. It was introduced in phases from 2010, to replace octroi. But when it was scrapped last year, the state was expected to give Rs 7,648.82 crore in 2015-16 to these civic bodies as compensation against their losses. The assistance will continue till the goods and services tax (GST) comes into force.

Traders protest
Traders and retailers have protested the decision. “The consumers will definitely have to pay more,” said Adarsh Shetty, president of the Mumbai unit of the Indian Hotel and Restaurant Association (Ahar).

Ahar’s Thane unit chief Saiprasad Shetty was taken aback when mid-day broke the news to him. “How can the government do this? The hotel and restaurant business has always been a soft target for the taxmen,” he fumed.

Shetty said the hotel industry gives the government a higher revenue than others, yet it is being taxed further. “The consumers will be affected. We will decide our further course of action once the official circular that is based on the cabinet decision is issued.”

The government justified its decision. “The municipal corporations where LBT is abolished need to be compensated in view of their revenue deficit that they face since August 2015,” said the official release.

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