Finance Minister Nirmala Sitharaman on Monday presented the Budget 2021-22, starting her speech by saying how healthcare and wellbeing takes precedence. From announcing a massive spending plan focused on healthcare and infrastructure, the government through its budget aims to rebuild the badly-hit economy due to the coronavirus pandemic. One of many things that caught the attention and quickly became the talking point on social media is 100 percent cess on alcohol.
Without even reading the fine print, many jumped to conclusions that liquor is going to cost twice as much now. But that's not nearly the case. In fact, there might be an upside to buying liquor - more on moral ground.
Deciphering 100% cess on liquor
Sitharaman announced that the government will impose an Agriculture Infrastructure and Development Cess (AIDC) on alcohol among other goods, such as gold, silver, petrol, diesel, peas, apple and cotton. The 100 percent cess has been imposed on all foreign alcoholic beverages including scotch, wine, brandy, bourbon and whiskey. So the immediate reaction by anyone here would be a generous price hike on liquor. But no, that's not the case.
"While applying this cess, we have taken care not to put additional burden on consumers on most items," the finance minister said. And rightly so.
FM Sitharaman explained how a 100 percent cess on liquor won't attract price hike on liquor for consumers. To balance the equation, the basic customs duty on foreign liquor has been reduced to accommodate the AIDC cess. Since imported liquor used to attract 150 percent basic customs duty, the current budget has slashed the same to 50 percent. Now, with 100 percent agri infra cess, the 150 percent cess on alcohol remains intact, hence keeping the prices of foreign liquor unchanged for consumers.
Contribute to India's infrastructure push
With this move, foreign liquor consumers will further India's infrastructure development. According to the Budget 2021-22, 100 percent of the 150 percent cess on imported liquor will be used for the improvement of agriculture infrastructure, so that's your moral high ground for buying more booze.
"This cess shall be used to finance the improvement of agriculture infrastructure and other development expenditure," the Finance Ministry said in a statement.
Union Budget 2021 highlights