INDIA – The Karnataka government has implemented a reduction in the tax slabs for premium liquors, effective immediately, in an effort to make high-end brands more affordable, boost sales, and increase state revenue.
The move, initially slated for July 1, 2024, was delayed, resulting in a scarcity of Indian-made foreign liquor (IMFL) in retail outlets over the past three months.
An Excise Department official stated that the tax cut aims to curb the practice of purchasing premium alcohol from outside Karnataka, thereby boosting local sales and augmenting revenue.
Due to the postponement of the tax revision, many IMFL brands became unavailable in the market, as breweries were hesitant to produce at higher costs while selling at lower prices.
Liquor vendors have expressed optimism that the supply of IMFL will return to normal within the next few weeks, now that the revised price list has been confirmed by Excise Department officials.
Retail outlet owners highlighted the impact of the delay, noting that nearly half of the IMFL brands were absent from shelves, leaving customers without their preferred choices.
This shortage led to increased prices for premium liquors, prompting consumers to purchase these products from neighboring states where prices were lower, ultimately resulting in a loss of revenue for the Karnataka government.
In contrast to the price reduction for premium liquors, beer prices in the state are expected to rise, with a potential hike of Rs 10 (US$0.12) to Rs 30 (US$0.36) per bottle, depending on the brand and alcohol content.
Beer has witnessed a surge in popularity, with sales more than doubling over the past two years, driven by post-Covid consumer behavior and high summer temperatures.
The Excise Department, which collected approximately Rs 5,703 crore (US$679.17M) in 2023-24, compared to Rs 2,757 crore (US$328.33M) in 2021-22, has proposed a new pricing structure for beer.
This structure introduces three different slabs based on alcohol content, replacing the current flat rate.
Additionally, an increase in Additional Excise Duty (AED) is expected for both bottled and draught beer, contributing to the anticipated price hike.
The final decision on beer pricing will be made after all stakeholders have submitted their objections and feedback on the proposed changes.
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