In the times of stress and depression, Consuming liquor has been an orthodox way of forgetting sorrows and running away from the hardships of reality. No wonder there are long queues and huge crowds outside liquor shops after the Government of India (GOI) has relaxed some of the lockdown rules, the tensity that people are facing in these times is unparalleled by all means. However, these long queues will do no good for society as it defies the concept of “Social Distancing” that we are supposed to live with. So, it is safe to say that drinking liquor may help you stay away from the reality but it can’t help you change it.

Doesn’t it mean that the GOI should ban these liquor shops until the situation normalises? It may seem an appropriate solution but it is not as facile it may appear. According to an RBI report, the State Governments (SGs) and the Union Territories (UTs) were budgeted to earn excise tax revenue of Rs. 1.70 lakh crores which accounts for approximately 10-15 percent of SGs/UTs total tax revenue in the financial year 2019-20. So, closing these shops would mean SGs/UTs will loose a hefty amount of tax revenue which in turn could be spent for the development of the State/UTs.

The above situation has trapped the GOI between the rock and a hard place, the solution for which may lie in the word “CESS”.

Let us understand what is a Cess?

Cess means a tax and is generally used when the levy is for some special administrative expense which the name (health cess, education cess, road cess etc.) indicates. As per landmark judgement of “Vijayalakshmi Rice Mills vs Commercial Tax Officers”, the honourable Supreme Court explained a “Cess” to be a special kind of tax, as proceeds have to be used for a specific purpose. By way of illustration, the Court explained that a health cess must be used for building hospitals, giving medicines to the poor and other purposes related to health.

Now that we understand the meaning of cess, it is obvious that the funds collected from the cess named as “Coronavirus Cess” would definitely be used for fighting against coronavirus only.

Next question that arise is Who has the Authority to levy such cess?

Under the landmark judgement of “Gwalior Sugar Co. Ltd. v State of Madhya Bharat (Now Madhya Pradesh)”, the Honourable supreme court opined that a cess must be levied under the authority of law, meaning a constitutionally valid legislation and not merely an executive order.

Now let us understand the term “constitutionally valid legislation” in the context of Coronavirus cess levied on manufacturing and sale of “liquor for human consumption” (hereinafter also referred to as “Liquor”). Article 246 (Seventh Schedule) of the Indian Constitution, distributes legislative powers including taxation, between the Central (Union) and the State Legislature. Under the aforementioned Schedule, the power to levy excise duty on manufacturing and sale of “liquor for human consumption” lies with the State Government. This is the reason why every state has their own excise laws for levying duty on liquor for human consumption.

Same Cess with varied names.

Considering the above power given in the Indian Constitution, any additional levy on liquor can also, only be imposed by the SG. Due to this, the SGs are levying Coronavirus Cess on liquor manufacturing with different names and at different rates. While the Delhi Government has imposed Cess in the form of Special Corona fee @ 70% on the Maximum Retail Price (MRP) of Liquor, the Himachal Pradesh Government has proposed to impose cess in the form of “Corona cess” for which rates vary per bottle of liquor between Rs. 5 to Rs. 25 per bottle.

What can we conclude from this?

The specific purpose of this cess is to support the falling economy in the times of this pandemic with focus on improving the health care facilities. However, the cause for implementing such cess is not just to fill their own pockets but also to increase the burden on the pockets of those standing in the long queues which could in turn lead to lesser demand of liquor and better adherence to the Social Distancing Norms that the GOI is trying to implement. Thus, making the Coronavirus cess “A Double-Edged Sword”.

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Qualification: CA in Practice
Company: GAA & Co.
Location: New Delhi, IN
Member Since: 25 Apr 2020 | Total Posts: 2

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