After the economy took a massive hit after there being no stimulus or activity in the country for over a month, we have to make ourselves familiar with something known as the “lockdown tax”.
To define, this is a tax that some states are going to impose to make up for all the lost revenues that have occurred due to the lockdown. There has been a huge slump in revenue collections and therefore, there will be steep hikes on taxes.
Since the borders in most cases have been sealed and will remain that way for a while, the risk of people smuggling cheap goods from neighbouring states is not a huge cause for concern.
Recently the Delhi government added a 70% tax on the maximum retail price of liquor. That also qualifies as one of the lockdown fees. The tax is a method of making up for the lost revenues as alcohol is a highly demanded product that people are also willing to pay a huge price for.
Similarly, the Andhra Pradesh government increased the prices of liquor in their state by 25%. And on Tuesday they further added a 50% tax on it. How this will benefit the government is because all the 3,468 retail outlets in the state are government owned and therefore, this would result in an additional revenue of Rs 9,000 crore a year.
In addition to the liquor tax, the petrol prices in the national capital also increased by Rs. 1.67 a litre on Tuesday and diesel by 7.10 per litre after the government added the taxes on these two fuels.
On one hand the Value Added Tax (VAT) on petrol was increased from 27% to 30%. On the other hand, on diesel, the VAT was doubled from 16.75% to 30%. The expected gain from this is Rs. 900 crore annually.
Other areas where states are considering increasing tax are in the entertainment tax, municipal taxes and local panchayat cess. Registration charges on cars and property is also among the options being considered.