Despite being perennially under pressure with its finances, the Meghalaya cabinet decided today to reduce the VAT on liquor and introduce an income tax exemption for non-tribal central government employees in the state, measures that will cost the exchequer upwards of Rs 85 crore per year.
Speaking to reporters after the cabinet meeting, Deputy Chief Minister Prestone Tynsong announced that VAT on liquor will be reduced to 37.5 per cent from the existing 40 per cent. ‘Lifting charges’ have also reverted to Rs 2, the rate prior to May 2020.
This will cost the Meghalaya government Rs 80-85 crore per annum, Tynsong said, but is a necessary response to neighbouring Assam’s drastic reduction in the tax on alcohol; Assam removed its 25 percent Covid cess recently.
Meghalaya has some of the cheapest liquor in the country. If, however, Assam sells its alcohol at a lower rate, this will encourage smuggling of booze from that state, which has a long and porous border with Meghalaya.
“We are living in a competitive world, be it between one state government and another,” the Deputy CM said. “In the last budget session of Assam they reduced it (the price of alcohol) drastically where the price of liquor has come down and the difference in the cost is not less than Rs 10 to Rs 50, so we are bound to reduce it.”
Meanwhile, in a bid to encourage central government civil servants working in Meghalaya, the cabinet has decided to reimburse them for 95 percent of their income taxes.
“We are the first state government that has taken the decision that, for those non-tribal all-India service officers who are serving in the state, the government will reimburse 95 percent of the amount entitled by each of them to pay to the Income Tax Department,” Tynsong said. “The government felt we needed to do something for the officers serving in the state. Why not show our goodness by extending a special package?”
This move will cost the state government Rs 1.45 crore annually, he added.
Another tax rebate was also doled out to state government employees working elsewhere in the country, such as those staffing Meghalaya Houses. Even tribal employees, when working outside their home state, have to pay income tax and the cabinet agreed that they be reimbursed for this.
The Finance Department has been directed to work out the amount which will be incurred annually to spend on reimbursement of income tax for the tribal employees.
