Bengaluru: The excise duty on sale of liquor has become one of the steadiest sources of capital inflows for Karnataka, giving it funds not just for developmental activities but also to pay the bills during the hardships heaped on by the Covid-19 pandemic. The state government has earned 1,445.03 crore in the form of excise duty levied on sale of liquor in May, which is marginally lower than 2,205.66 crore a month ago, according to data from the state’s excise department.

Though the state has recorded a decline in collection from April, officials said the difference will be made up in the coming months.

“We will meet revenue targets this year as well,” said one senior government official, requesting not to be named.

With one of the more liberal policies for sale of liquor in the country, the state has reported decline in excise revenue collection only once in 1977-78, when the collection of 52.24 crore was 4 lakh less than the previous year. In 1967-68, Karnataka recorded 7.11 crore in excise duty collection, data shows.

Despite the complete lockdown for nearly two months last year (April and May 2020), Karnataka was able to not just meet its annual target of 22,700 crore but exceeded the same by around 300 crore, bringing in much needed revenues for the state, which is among the worst-hit regions due to Covid-19.

Excise has assumed more importance in recent years after the onset of the goods and services tax (GST) regime, in which states are left with very few avenues of direct income like cess from petrol and diesel, professional tax, stamps and registration and transport department among others. With Karnataka’s share of central taxes being cut sharply under the 15th Finance Commission, the dependence on excise has increased, according to people aware of the developments.

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The revenue collection target for the transport department fell short of the target of 7,115 crore in 2020-21 while the revenue goal for 2021-22 has been fixed at 7,515 crore, according to the budget document.

Likewise, revenue collection for stamps and registration too fell in 2020-21, failing to reach its target of 12,655 crore, prompting the government to retain the same goal for the current fiscal as well.

Revenue collection target for commercial taxes department for 2021-22 is fixed at 76,473 crore.

While collections have improved in the state with the help of revenues from excise, the same may not hold true for sales of liquor and beer, retailers said.

Karnataka increased duty on excise twice last year, ranging between 17% and 25%, which brought in higher revenue, they added.

The government has fixed a revenue target of 24,580 crore for 2021-22, as presented in the budget document by chief minister BS Yediyurappa-led state government.

The total sales of Indian Made Liquor or IML in May was 4.36 million carton boxes (CBs), registering a 1.78% dip, as against 5.59 million CBs in April.

Meanwhile, beer registered a 37.59% decline with sales of 767,000 CBs in May as against 2.57 million CBs in April, data from the excise department shows.

“The increase in excise duty brings in more revenues for the state but sales are down for most of us,” said Lokesh, president of the Bengaluru Wine Merchants Association.

He said that information, or misinformation, that people should not consume alcohol for a month after getting vaccinated, economic difficulties and loss of livelihoods during the Covid-induced lockdown have weighed on the industry.

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According to industry insiders, most of the annual renewal of permits is done in June. The industry is now hoping for some respite in the form of any concessions, they said.

Last year, the department had extended the date of renewal and a provision to pay licence fee in instalments and the same is expected this time too, the official cited above said.

“The timing for opening liquor shops is now from 6am to 10 am. So not many people come this early as the same timing applies to other essentials shops as well,” said Govindaraj Hegade, secretary of the Federation of Wine Merchants Association.

Liquor sales work for standalone shops but revenue is hard to come by for restaurants and breweries, whose margins come from dine-in customers. “Our business is less than 10% of what it normally is. We are trying to pay our staff and keep our kitchens running,” said the owner of a Bengaluru-based microbrewery, requesting not to be named.

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