Liquor Policy of States
Explained: Delhi Excise Policy Scam
Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: Delhi Excise Policy Scam
Central Idea
- A Delhi court has remanded a member of Rajya Sabha in Enforcement Directorate (ED) custody in the Delhi Excise Policy Scam.
- This has created a big furore among people over the alleged involvement of a hardliner political party which was established solely to fight political corruption.
About Delhi Excise Policy Scam
- Background: Both individuals face corruption allegations related to the formulation and implementation of the Delhi Excise Policy 2021-22, which came into effect but was later scrapped.
- Procedural Lapses: The allegations stemmed from a report submitted by Delhi Chief Secretary to the Lieutenant Governor in July 2022. The report pointed to procedural lapses in the policy’s formulation.
- Financial Losses: The report claimed that “arbitrary and unilateral decisions” led to estimated “financial losses to the exchequer.”
- Alleged Irregularities: It alleged that leaders received “kickbacks” from businesses for preferential treatment, such as discounts, license fee waivers, and relief due to disruptions caused by the Covid-19 pandemic. These funds were purportedly used for electoral influence.
Involvement of the Enforcement Directorate (ED)
- ED’s Role: Following the CBI’s FIR, the ED asserted that the alleged proceeds of crime required investigation to establish the modus operandi.
- Investigation Details: The ED alleged that the “scam” involved irregularities in the wholesale liquor business, margin-fixing, and receiving kickbacks. It claimed that the policy was designed with “deliberate loopholes” to benefit key figures.
- Financial Transactions: The ED also alleged that individuals, acting as intermediaries, received substantial sums from a group, allowing them access to various businesses.
Differences in the Delhi Excise Policy
- Policy Goals: The Delhi Excise Policy 2021-22 aimed to exit the state from the liquor business, eliminate black marketing, increase revenue, enhance consumer experiences, and ensure equitable distribution of liquor vends.
- Private Operation: Under the policy, Delhi was divided into zones, each with liquor vends operated by private licensees. Licensees had the freedom to offer discounts and set prices.
Issues and Reversals
- Deviation from Procedures: A report in July 2022 highlighted deviations from established procedures in the policy formulation.
- Market Distortions: The report pointed out that discounts offered by liquor retailers were causing market distortions.
- Policy Reversals: It noted policy reversals, leading to questions about the justification for such changes.
- Blanket Relaxations: The report flagged blanket relaxations granted for default in license fee payments.
ED Chargesheets and Allegations
- Campaign Funding: The ED has alleged financial improprieties related to campaign funding.
- Conduit for Financial Transactions: Individuals are alleged to have acted as intermediaries in financial transactions.
- Involvement of Key Figures: The ED has claimed the involvement of certain individuals in meetings and interactions related to the case.
Conclusion
- The scam has led to arrests and legal proceedings involving corruption allegations and procedural lapses.
- Allegations of financial improprieties and irregularities in the policy’s implementation have created a complex legal landscape.
- The involvement of the Enforcement Directorate adds to the intricacies of the case, while ongoing investigations seek to establish the veracity of the allegations.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Liquor Policy of States
Legalizing Cannabis Cultivation and Decriminalizing Drug Use
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Cannabis cultivation and its applications
Mains level: legalizing cannabis cultivation and issues of criminalizing drug users
Central Idea
- Himachal Pradesh is reportedly considering legalizing cannabis cultivation, joining Uttarakhand, Gujarat, and Madhya Pradesh. The criminalisation of cannabis cultivation and drug use in India under the Narcotic Drugs and Psychotropic Substances (NDPS) Act 1985 has resulted in long pre-trial incarceration, stigmatisation of users, and poor rehabilitation prospects. A public health approach could help address drug dependence and reduce the burden on the criminal justice system.
What is Cannabis?
- Cannabis, also known as marijuana among other names, is a psychoactive drug from the Cannabis plant used primarily for medical or recreational purposes.
- The main psychoactive component of cannabis is tetrahydrocannabinol (THC), which is one of the 483 known compounds in the plant, including at least 65 other cannabinoids, including cannabidiol (CBD).
- It is used by smoking, vaporizing, within the food, or as an extract.
Prospects of legalizing Marijuana
- Health benefits:
- The cannabinoids found in Cannabis is a great healer and has found mentioned in Ayurveda.
- It can be used to treat a number of medical conditions like multiple sclerosis, arthritis, epilepsy, insomnia, HIV/AIDS treatment, and cancer.
- Ecological benefits:
- The cannabis plant and seeds apart from being labelled a super-food as per studies is also a super-industrial carbon-negative raw material.
- Each part of the plant can be used for some industry. Hemp currently is also being used to make bio-fuel, bio-plastics and even construction material in certain countries. The cosmetic industry has also embraced Hemp seeds.
- Marijuana is addiction-free:
- An epidemiological study showed that only 9% of those who use marijuana end up being clinically dependent on it.
- The ‘comparable rates’ for tobacco, alcohol and cocaine stood at 32%, 15% and 16% respectively.
- Good source of Revenue:
- By legalizing and taxing marijuana, the government will stand to earn huge amounts of revenue that will otherwise go to the Italian and Israeli drug cartels.
- In an open letter to US President George Bush, around 500 economists, led by Nobel Prize winner Milton Friedman, called for marijuana to be “legal but taxed and regulated like other goods.
- A potential cash crop:
- The cannabis plant is something natural to India, especially the northern hilly regions. It has the potential of becoming a cash crop for poor marginal farmers.
- If proper research is done and the cultivation of marijuana encouraged at an official level, it can gradually become a source of income for poor people with small landholdings.
- Prohibition was ineffective:
- In India, the consumption of synthetic drugs like cocaine has increased since marijuana was banned, while it has decreased in the US since it was legalized in certain states.
- Moreover, these days, it is pretty easy to buy marijuana in India and its consumption is widespread among the youth. So it is fair to say that prohibition has failed to curb the problem
- Marijuana is less harmful:
- Marijuana consumption was never regarded as a socially deviant behaviour any more than drinking alcohol was. In fact, keeping it legal was considered as an enlightened view.
- It is now medically proven that marijuana is less harmful than alcohol.
All you need to know about Narcotic Drugs and Psychotropic Substances (NDPS) Act 1985
- The Narcotic Drugs and Psychotropic Substances (NDPS) Act is an Indian law that prohibits the production, manufacture, possession, transportation, sale, and consumption of narcotic drugs and psychotropic substances.
- The Act was enacted in response to the US-led global war on drugs in the 1970s.
- The NDPS Act has been amended several times since its enactment, with the most recent amendment being in 2014.
- The Act defines different categories of drugs and prescribes different punishment for different offenses.
- The Act has been criticized for its strict provisions, especially for small-scale drug users, who are often imprisoned and face difficulty accessing rehabilitation and de-addiction centers. In recent years, there have been calls for decriminalizing small-scale drug use and treating drug consumers as victims rather than offenders.
Why criminalizing drug users is not a good option?
- Pre-trial incarceration and stigmatization: Criminalization means long pre-trial incarceration and stigmatization of drug users, who are often from socially and economically vulnerable backgrounds.
- Lack of access to de-addiction centres: Many drug users lack access to de-addiction centres, which makes their rehabilitation difficult.
- Difficulty in rehabilitation: Putting drug users behind bars makes their rehabilitation difficult and exposes them to the risk of becoming peddlers.
- Overburdened criminal justice system: Over-criminalisation of drug users clogs already burdened courts and adds to the workload of overworked investigating agencies.
- Squandering public resources: Public resources that could have been deployed to set up a robust rehabilitation network are squandered away in the process.
- Ineffective in deterring drug use: Criminalisation was intended to deter the use of drugs. However, drug dependence has increased over the years across the world.
- Undermining social well-being: The over-criminalisation of drug users undermines their social well-being, which perpetuates the cycle of addiction and crime.
Steps to address the negative impact of criminalizing drug users
- Decriminalization: The government should consider decriminalizing the possession of small quantities of drugs for personal consumption, as recommended by the Ministry of Social Justice and Empowerment. This will treat drug users as victims rather than culprits and facilitate their rehabilitation.
- Public health approach: The government should adopt a public health approach to address drug use as a public health issue. This involves providing healthcare services to drug users, focusing on their well-being and rehabilitation, rather than just punishing them.
- Differentiating between peddlers and consumers: The government should differentiate between drug peddlers and drug consumers and take different approaches to dealing with them. While drug peddlers should be punished, drug users should be treated as victims and provided with rehabilitation services.
- Setting up a robust rehabilitation network: The government should allocate resources to set up a robust rehabilitation network for drug users. This will help address the root cause of drug use and reduce its negative impact on society.
- Public awareness campaigns: The government should conduct public awareness campaigns to educate people about the negative impact of drug use on health and well-being. This will help reduce the demand for drugs and prevent drug use among the population.
Facts for prelims
What is CBD oil?
|
Conclusion
- The criminalization of drug use in India has not deterred drug dependence and has resulted in a burden on the criminal justice system. A public health approach could help address drug dependence and reduce the stigma associated with drug use. India could learn from the examples of countries like Portugal and Canada and the state of Sikkim.
Mains Question
Q. Recently more and more states are considering legalizing cannabis cultivation. In light of this discuss the benefits of its cultivation and impact of criminalizing drug users in India.
Also read:
| Himachal Pradesh considering legalizing Cannabis Cultivation |
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Liquor Policy of States
Himachal Pradesh considering legalizing Cannabis Cultivation
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Cannabis , Marijuana, NDPS Act
Mains level: Legalizing marijuana
Himachal Pradesh CM has announced that the state government is considering legalizing the cultivation of cannabis.
What is Cannabis?
- Cannabis, also known as marijuana among other names, is a psychoactive drug from the Cannabis plant used primarily for medical or recreational purposes.
- The main psychoactive component of cannabis is tetrahydrocannabinol (THC), which is one of the 483 known compounds in the plant, including at least 65 other cannabinoids, including cannabidiol (CBD).
- It is used by smoking, vaporizing, within the food, or as an extract.
Prospects of legalizing Marijuana
(1) Health benefits
- The cannabinoids found in Cannabis is a great healer and has found mentioned in Ayurveda.
- It can be used to treat a number of medical conditions like multiple sclerosis, arthritis, epilepsy, insomnia, HIV/AIDS treatment, and cancer.
(2) Ecological benefits
- The cannabis plant and seeds apart from being labelled a ‘super-foods’ as per studies is also a super-industrial carbon-negative raw material.
- Each part of the plant can be used for some industry. Hemp currently is also being used to make bio-fuel, bio-plastics and even construction material in certain countries. The cosmetic industry has also embraced Hemp seeds.
(3) Marijuana is addiction-free
- An epidemiological study showed that only 9% of those who use marijuana end up being clinically dependent on it.
- The ‘comparable rates’ for tobacco, alcohol and cocaine stood at 32%, 15% and 16% respectively.
(4) Good source of Revenue
- By legalizing and taxing marijuana, the government will stand to earn huge amounts of revenue that will otherwise go to the Italian and Israeli drug cartels.
- In an open letter to US President George Bush, around 500 economists, led by Nobel Prize winner Milton Friedman, called for marijuana to be “legal but taxed and regulated like other goods”.
(5) A potential cash crop
- The cannabis plant is something natural to India, especially the northern hilly regions. It has the potential of becoming a cash crop for poor marginal farmers.
- If proper research is done and the cultivation of marijuana encouraged at an official level, it can gradually become a source of income for poor people with small landholdings.
(6) Prohibition was ineffective
- In India, the consumption of synthetic drugs like cocaine has increased since marijuana was banned, while it has decreased in the US since it was legalized in certain states.
- Moreover, these days, it is pretty easy to buy marijuana in India and its consumption is widespread among the youth. So it is fair to say that prohibition has failed to curb the ‘problem’.
(7) Marijuana is less harmful
- Marijuana consumption was never regarded as a socially deviant behaviour any more than drinking alcohol was. In fact, keeping it legal was considered as an ‘enlightened view’.
- It is now medically proven that marijuana is less harmful than alcohol.
Risks of Legalizing Cannabis
(1) Health risks continue to persist
- There are many misconceptions about cannabis. First, it is not accurate that cannabis is harmless.
- Its immediate effects include impairments in memory and in mental processes, including ones that are critical for driving.
- Long-term use of cannabis may lead to the development of addiction of the substance, persistent cognitive deficits, and of mental health problems like schizophrenia, depression and anxiety.
- Exposure to cannabis in adolescence can alter brain development.
(2) A new ‘tobacco’ under casualization
- A second myth is that if cannabis is legalized and regulated, its harms can be minimized.
- With legalization comes commercialization. Cannabis is often incorrectly advertised as being “natural” and “healthier than alcohol and tobacco”.
- Tobacco, too, was initially touted as a natural and harmless plant that had been “safely” used in religious ceremonies for centuries.
(3) Unconvincing Advocacy
- Advocates for legalization rarely make a convincing case. To hear some supporters tell it, the drug cures all diseases while promoting creativity, open-mindedness, moral progression.
- Too much trivialization of Cannabis use could lead to its mass cultivation and a silent economy wreaking havoc through a new culture of substance abuse in India.
Legalization status elsewhere in India
- Several states in India have already legalized cannabis cultivation, including neighboring Uttarakhand, which became the first state in the country to do so in 2017.
- Controlled cultivation is being done in some districts of Gujarat, Madhya Pradesh, and Uttar Pradesh.
Legal Framework for Cannabis Cultivation
- Definition of Cannabis: The Parliament has defined cannabis in the Narcotic Drugs and Psychotropic Substances Act (NDPS), 1985.
- Ban on extracting resin and flowers: While a complete ban has been imposed on extracting the resin and flowers of the cannabis plant, the law determines the method and extent of cultivation of cannabis for medicinal and scientific purposes.
- Authorities to States: Section 10 (a) (iii) of the Act empowers States to make rules regarding the cultivation of any cannabis plant, production, possession, transport, consumption, use, purchase, sale, and consumption of cannabis (except charas).
- Cultivation of hemp: States are also empowered to permit, by general or special order, the cultivation of hemp, only for obtaining fibber or seeds or for horticultural purposes.
What next?
- The government will consider all aspects, including regulatory measures, and study the models followed by other States that have legalized cannabis cultivation, before taking the final call.
- Highlighted that the government is cautious about the potential increase in drug use, and will make a decision only after a thorough study by the committee.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Liquor Policy of States
In news: Bihar Hooch Tragedy and Alcohol Ban
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Alcohol laws
Mains level: Read the attached story
The official death toll from the latest hooch tragedy in “dry” Bihar has mounted to 38. Bihar has completely prohibited alcohol.
Alcohol Ban in India
- India has a long history of banning alcohol, with prohibition a part of the Directive Principles of State Policy in the Constitution and also among the key Gandhian principles.
- Gandhi wrote, “Alcohol makes a man forget himself and while its effects last, he becomes utterly incapable of doing anything useful. Those who take to drinking, ruin themselves and ruin their people.”
How the Indian constitution views alcohol?
- One of the DPSP mentions that “in particular, the State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health.”
- While DPSPs are not in themselves legally enforceable, they set goals that the state should aspire towards to establish conditions under which citizens can lead a good life.
- According to the Seventh Schedule, alcohol is a state subject, i.e. state legislatures have the right and responsibility to draft laws regarding it.
- This includes “the production, manufacture, possession, transport, purchase and sale of intoxicating liquors.
- Thus, laws regarding alcohol differ from state to state, falling in the whole spectrum between prohibition and private sale.
Why do all states not have prohibition?
Ans. Huge Liquor Revenues
- While the Constitution sets prohibition on alcohol as a goal, for most states, it is very difficult to declare a ban on alcohol.
- This is primarily because liquor revenues are not easy to ignore and have consistently contributed a large share of state governments’ revenue.
- For instance, in Maharashtra, state liquor revenues amounted to Rs 11,000 crore in April 2020 (during the nationwide Covid lockdown), compared with Rs 17,000 crore in March.
- The state government attributed much of this drop to the closure of liquor stores, later categorising them as an essential service, in part due to the industry’s contribution to tax revenues.
- The day liquor stores were reopened, the Maharashtra government collected Rs 11 crore revenue from liquor sales in a single day.
States with complete ban
- All states have some regulations with regards to alcohol consumption and sale (like age requirements or dry days).
- Currently, there are five states with total prohibition and some more with partial prohibition:
(1) Bihar
- Both the sale and prohibition of liquor was completely banned by the Nitish Kumar government back in 2016, in keeping with a promise made to the women of Bihar ahead of the Assembly polls.
- Severe punishments were imposed on those found to be flouting the ban, including heavy fines and prison sentences.
- Earlier this year, the Bihar government passed an amendment to its prohibition laws, which dials down on punishment to first-time “drinkers” and lets them get away with a fine rather than face arrest.
- This was done to unclog Bihar’s already overcrowded jails and focus the government’s attention on sellers and distributors rather than consumers of liquor.
(2) Gujarat
- Gujarat has had prohibition since it came into existence as a state in 1960.
- In the 62 years since prohibition has been around in Gujarat, the Act has seen several amendments.
- Notably, in 2009, then CM introduced the death penalty for sellers/producers if their spurious alcohol caused deaths.
- However, Gujarat has provisions for special alcohol licences for hospitality establishments as well as individuals.
(3) Lakshadweep
- The Union Territory bans both the consumption and sale of alcohol keeping in mind the culture and sentiments of its predominantly Muslim population.
- However, the island of Bangram has a resort with a bar which is allowed to legally serve liquor.
(4) Mizoram
- In 2019, Mizoram became a “dry state” once again after the new government reintroduced prohibition that was repealed in 2015.
- Previously, Mizoram had seen prohibition for 18 years.
- The Mizo National Front (MNF) government had prohibition as one of its most important pre-poll promises.
- Here, the loss of revenue is much less than the loss of human life and suffering. Larger societal benefit is considered more vital.
- Only military personnel and those with “medical needs” are allowed to consume alcohol.
(5) Nagaland
- Nagaland introduced total prohibition in 1989 due to “moral and social” reasons, for the greater good of its citizens.
- However, in recent times, the Naga government has mulled partially lifting prohibition due to various reasons.
Partial prohibitions in some states
- Some states with partial prohibition are Karnataka, which specifically banned country-made arrack in 2007.
- In Maharashtra, the districts of Wardha and Gadhricholi have banned on production and sale of liquor.
- In Manipur, districts of Bishnupur, Imphal East, Imphal West and Thoubal have prohibition.
- In 2014, then CM Oomen Chandy announced that Kerala would implement prohibition in a phased manner.
- However, the state has since gone back on this promise.
Reason behind Bihar tragedy: Alcohol Ban
- Critics have claimed that one of the reasons behind the tragedy is the state’s prohibition policy.
- An official ban on alcohol leads to a thriving underground economy where such spurious alcohol is produced and sold.
Does prohibition really work?
- Creates no deterrence: There is evidence to show that, prohibition creates opportunities for a thriving underground economy that distributes liquor, outside the regulatory framework of the state.
- Rise of mafias: This creates its own problems, from strengthening organized crime groups (or mafias) to the distribution of spurious liquor.
- No evidence of progress: In the case of Bihar, a year after prohibition was enforced, there was a spike in substance abuse.
- Anti-poor: In the case of Bihar, a majority of cases registered under its prohibition laws are on the less privileged.
Limited benefits
- Prevented crime against women: Various studies have provided evidence linking alcohol with domestic abuse or domestic violence. In India, prohibition has often been framed as a “women’s rights” issue.
- Prevented domestic violence: Prohibition might have some limited benefits as well. Various studies have provided evidence linking alcohol with domestic abuse or domestic violence.
Click and get your FREE Copy of CURRENT AFFAIRS Micro Notes
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Liquor Policy of States
What is Black Cocaine?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Black Cocaine
Mains level: Drugs smuggling in India
The Narcotics Control Bureau (NCB) has arrested a Bolivian woman from Mumbai airport for allegedly carrying black cocaine.
What is Black Cocaine?
- “Black cocaine”, a rare drug, is a mixture of regular cocaine and other chemicals of administrated quantity.
- It neutralises the smell of cocaine so that it can pass through checkpoints easily.
- Black cocaine is a mixture of regular cocaine base with various substances to camouflage typical appearance (e.g. charcoal).
- It surpasses colour-based drug tests (cobalt salts form deep red complexes in solution), to make the mixture undetectable by drug-sniffing dogs as activated carbon may sufficiently absorb trace odours.
- The pure cocaine base is then recovered from the mixture by extraction using common organic solvents such as methylene chloride or acetone.
- A second process is required to convert the cocaine base into powdered cocaine hydrochloride.
What has been the major source of cocaine in India?
- South American countries where coca plants grow are major suppliers of cocaine to India.
- Generally, Mumbai is one of the landing points from where it is then sent to other parts of the country, especially to metro cities and Goa.
- Amongst narcotics, Cocaine is one of the most expensive ones and is primarily used by the upper classes of society.
UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Liquor Policy of States
Alcohol Laws in India
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Alcohol laws
Mains level: Read the attached story
The most ambitious Delhi’s Alcohol Policy 2021-22 which brought in big discounts for consumers was scrapped on July 31 amid allegations of corruption and irregularities in the drafting and implementation of the policy.
After scrapping the new policy, the Delhi government decided to bring back the ‘old excise regime’ that was in force before.
Definitely! We shall not nit-pick the old vs. new policy. Let us generally understand how alcohol is regulated in India.
Alcohol laws of India: A backgrounder
- The legal drinking age in India and the laws which regulate the sale and consumption of alcohol vary significantly from state to state.
- In India, consumption of alcohol is prohibited in the states of Bihar, Gujarat, Nagaland and Mizoram.
- There is partial ban on alcohol in some districts of Manipur.
- All other Indian states permit alcohol consumption but fix a legal drinking age, which ranges at different ages per region.
- In some states the legal drinking age can be different for different types of alcoholic beverage.
Regulation
- Alcohol is a subject in the State List under the Seventh Schedule of the Constitution of India.
- Therefore, the laws governing alcohol vary from state to state.
- Liquor in India is generally sold at liquor stores, restaurants, hotels, bars, pubs, clubs and discos but not online.
- Some states, like Kerala and Tamil Nadu, prohibit private parties from owning liquor stores making the state government the sole retailer of alcohol in those states.
- In some states, liquor may be sold at groceries, departmental stores, banquet halls and/or farm houses.
- Some tourist areas have special laws allowing the sale of alcohol on beaches and houseboats.
Drunk driving law
- The blood alcohol content (BAC) legal limit is 0.03% or 0.03 mg alcohol in 100 ml blood.
- On 1 March 2012, the Union Cabinet approved proposed changes to the Motor Vehicle Act.
- Higher penalties were introduced, including fines from ₹2,000 to ₹10,000 and imprisonment from 6 months to 4 years.
- Different penalties are assessed depending on the blood alcohol content at the time of the offence.
Dry days
- Dry days are specific days when the sale of alcohol is not permitted.
- Most of the Indian states observe these days on major national festivals/occasions such as Republic Day (26 January), Independence Day (15 August) and Gandhi Jayanti (2 October).
- Dry days are also observed during elections in India.
Taxation on Alcohol
- Most states levy either Value added Tax (VAT) or Excise duty or both.
- Excise duty is a tax levied to discourage the consumption of a product.
- It is calculated on a per-unit basis. Meaning, if you buy 1 litre of liquor, you pay a fixed excise duty of Rs 15.
- Value-added Tax is charged in the proportion of the product. If a bottle costs Rs 100, and the state levies 10 percent VAT, the price rises to Rs 110.
Tax rates in States
- The 29 states/UTs in India approach liquor taxation differently.
- For instance, Gujarat has banned its citizens from consuming liquor since 1961.
- But outsiders with special licenses can still buy.
- Puducherry, on the other hand, earns most of its revenue from alcohol trading.
- Bihar has prohibited alcohol consumption entirely, meaning the state’s revenue from liquor consumption is nil.
- Its neighbour, Uttar Pradesh, earns the most excise duty on liquor.
- The state does not levy VAT but a special duty on liquor, collecting funds for particular purposes.
Do you know?
Andhra Pradesh, Telangana, Kerala, Karnataka, and Tamil Nadu consume as much as 45 percent of the liquor sold in the country.
Nationally, Maharashtra charges the highest rate but draws only a portion of its revenue from its sales.
Why alcohol isn’t banned everywhere?
- Taxes from alcohol sales roughly form a quarter of state revenues.
- If this stream suddenly stops, states have to compulsorily cut some important spending.
- Also, moderate alcohol consumption may provide some health benefits.
UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Liquor Policy of States
Why liquor sale matters to states?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Excise duty, GST
Mains level: Contribution of liquor sale in state revenue
Following the ease of restrictions in the third phase of the nationwide lockdown, some of the most striking images showed long queues outside liquor stores around the country. The Delhi government announced a 70% hike in the price of liquor across categories in the capital.
Aspirants must note:
1. Purview of Excise duty (i.e. Petroleum and Liquor)
2. Excise duty before and after GST regime
3. Sources of state revenue etc.
4. Argument relating to inclusion of Liquor in GST
Why liquor matters?
- Delhi’s “special corona fee” on alcohol underlines the importance of liquor to the economy of the states.
- Manufacture and sale of liquor is one of the major sources of their revenue, and the reopening comes at a time when the states have been struggling to fill their coffers amid the disruption on account of the lockdown.
How do states earn from liquor?
- Liquor contributes a considerable amount to the exchequers of all states and UTs except Gujarat and Bihar, both of which have enforced prohibition.
- Generally, states levy excise duty on manufacture and sale of liquor.
- Some states, for example, Tamil Nadu, also impose VAT (value-added tax).
- States also charge special fees on imported foreign liquor; transport fee; and label & brand registration charges.
- A few states, such as UP, have imposed a “special duty on liquor” to collect funds for special purposes, such as maintenance of stray cattle.
Share in revenue
- A report published by the RBI last year shows that state excise duty on alcohol accounts for around 10-15 per cent of Own Tax Revenue of a majority of states.
- In fact, the state excise duty on liquor is the second or third largest contributor to the category State’s Own Tax revenue; sales tax (now GST) is the largest.
- This is the reason states have always wanted liquor kept out of the purview of GST.
What exactly is State Excise?
- Excise duty on alcohol, alcoholic preparations, and narcotic substances is collected by the State Government and is called “State Excise” duty.
- For most of the states, excise duty is the second largest tax revenue after sales taxes (state VAT).
- Besides, a substantial amount comes from licences, fines and confiscation of alcohol products.
What has changed with the State Excise after the GST regime?
- At the central level, excise duty earlier used to be levied as Central Excise Duty, Additional Excise Duty, etc.
- However, the Goods and Services Tax (GST), introduction in July 2017, subsumed many types of excise duty. Today, excise duty applies only on petroleum and liquor.
- Excise duty was levied on manufactured goods and levied at the time of removal of goods, while GST is levied on the supply of goods and services.
- Alcohol does not come under the purview of GST as exclusion mandated by constitutional provision.
- States levy taxes on alcohol according to the same practice as was prevalent before the rollout of GST.
- After GST was introduced, central excise duty was replaced by Central GST because excise was levied by the central government. The revenue generated from CGST goes to the central government.
What are the other sources of revenue for the states?
- The states’ revenues comprise broadly two categories — Tax Revenue and Non-Tax Revenue.
- Tax revenue is divided into two further categories: State’s Own Tax Revenue, and Share in Central Taxes.
- Again, Own Tax Revenue comprises three principal sources:
1) Taxes on Income (agricultural income tax and taxes on professions, trades, callings and employment);
2) Taxes on Property and Capital Transactions (land revenue, stamps and registration fees, urban immovable property tax); and
3) Taxes on Commodities and Services (sales tax, state sales tax/VAT, central sales tax, a surcharge on sales tax, receipts of turnover tax, other receipts, state excise, taxes on vehicles, taxes on goods and passengers, taxes and duties on electricity, entertainment tax, state GST, and “other taxes and duties”).
Back2Basics: What is Excise Duty?
- Excise duty is a form of tax imposed on goods for their production, licensing and sale.
- It is the opposite of Customs duty in sense that it applies to goods manufactured domestically in the country, while Customs is levied on those coming from outside of the country.
- At the central level, excise duty earlier used to be levied as Central Excise Duty, Additional Excise Duty, etc.
- Excise duty was levied on manufactured goods and levied at the time of removal of goods, while GST is levied on the supply of goods and services.
Purview of excise duty
- The GST introduction in July 2017 subsumed many types of excise duty.
- Today, excise duty applies only on petroleum and liquor.
- Alcohol does not come under the purview of GST as exclusion mandated by constitutional provision.
- States levy taxes on alcohol according to the same practice as was prevalent before the rollout of GST.
- After GST was introduced, excise duty was replaced by central GST because excise was levied by the central government. The revenue generated from CGST goes to the central government.
Types of excise duty in India
Before GST kicked in, there were three kinds of excise duties in India.
1) Basic Excise Duty
- Basic excise duty is also known as the Central Value Added Tax (CENVAT). This category of excise duty was levied on goods that were classified under the first schedule of the Central Excise Tariff Act, 1985.
- This duty was levied under Section 3 (1) (a) of the Central Excise Act, 1944. This duty applied on all goods except salt.
2) Additional Excise Duty
- Additional excise duty was levied on goods of high importance, under the Additional Excise under Additional Duties of Excise (Goods of Special Importance) Act, 1957.
- This duty was levied on some special category of goods.
3) Special Excise Duty
- This type of excise duty was levied on special goods classified under the Second Schedule to the Central Excise Tariff Act, 1985.
- Presently the central excise duty comprises of a Basic Excise Duty, Special Additional Excise Duty and Additional Excise Duty (Road and Infrastructure Cess) on auto fuels.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Kerala’s Liquor Policy: What’s wrong with it?
Recently, the Supreme Court upheld the ‘Liquor-Free Kerala’ policy restricting the serving of liquor to five-star hotels in the State. The apex court ruled that the State governments be given a free hand to curtail or ban public consumption of alcohol to protect public health and nutrition.
Before we go into details, let’s see the time-line of Kerala’s Excise Policy
2007 – Kerala govt. started tightening its excise policy to make liquor less-freely available in the state, in the interest of public health. It started a policy where only those hotels that were accorded 3-star or more by Union Govt.’s Ministry of Culture will be given new bar licenses.
2011 – It further tightened the policy by denying licenses to any hotels that were accorded less than 4-star by Union Govt.’s Ministry of Culture. However, those hotels with existing licenses were accorded amnesty, i.e. they were allowed renewal of licenses even if the hotel’s rating was less than 4-star.
2014 – Only hotels classed as 5-star and above by Union Govt.’s Ministry of Culture, will be allowed to serve liquor.
What is Liquor-Free Kerala policy?
The policy seeks to prohibit the sale and service of alcohol in all public places, except bars and restaurants in five-star hotels. To be precise, only five star hotels are now allowed to serve hard liquor. <Something, which is often confused>
- Other categories of hotels could supply only beer and wine.
- Govt-run liquor shops are to be phased out at a rate of 10% a year over the next decade.
- Toddy is exempt from the ban and the drink has long been part of Kerala’s culture.
Foreign tourists could be satisfied by beer and wine, while the domestic tourism sector will be the most affected as tourists from other states prefer hard liquor.
What is the need for bringing such a policy?
- Kerala accounts for 14% of the country’s liquor consumption.
- Even, the apex court said that it is well established that consumption of liquor is bad for health of humankind.
- Alcoholism critically impact the household budgets of the poor & may lead to domestic violence.
DPSP also requires state to endeavour for prohibition of intoxicating drinks and drugs, due to the well-known ill-effects on standards of living and public health.
How this ban could impact Kerala’s economy?
- Kerala earns about $ 3.8 billion/year from tourism, which is likely to be hit by the liquor ban. The state govt. has hiked excise duty on beer to 5% and that on liquor to 8% to offset revenue losses.
- The job opportunities in the tourism sector will also be get affected because of this policy, as the industry provides one out of four jobs in the state.
Why there is so much criticism against prohibition?
- Actually, the policy of prohibition does not encourage the people to quit the habit.
- It leads to underground trade and creates a market for spurious liquor.
- As a policy, prohibition has met with little success anywhere in India, due to corruption within enforcement agencies.
- Even when it has helped bring down overall consumption, prohibition has led to loss of lives in hooch tragedies.
What is the argument for exempting five-star hotels & why is it criticized?
- The State govt. has argued that it is in the interest of tourism.
- However, the Supreme Court’s decision to exempt five-star hotel seems unreasonable and arbitrary.
- The judgment strikes at the root of non-discriminatory treatment under the constitution.
Let’s analyse the court verdict vis-a-vis fundamental rights?
The case is known as The Kerala Bar Hotels Association vs State of Kerala.
The bar associations have argued that the liquor policy violates Art 19(1)(g) and Art 14.
Article 19(1)(g) – To practice any profession, or to carry on any occupation, trade or business.
- However, the liberty to freely carry on any trade or business is subject to reasonable restrictions that may be imposed by state in the interest of general public.
- This argument fails, since Art 47 requires state to make an endeavour towards improving public health, including to bring about prohibition of the consumption of liquor.
Art 14 – The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.
- The new excise policy had made an unreasonable classification by separately categorizing hotel of 5-star or more and permitting these hotels to serve liquor in public.
- Therefore, the policy violates Art 14 of constitution by treating persons on an equal standing unequally.
What could be the better policy alternative?
Experts argue that a better idea would be to engage non-state actors to step up the campaign for abstention.
Suggest some better policy alternatives or share some successful case-studies to curb the consumption of liquor.
Published with inputs from Pushpendra