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Karnataka recently rolled out a draft policy to alter the taxation structure on liquor sold in the state. The policy proposed taxing liquor based on the actual volume of alcohol present in it.
FILE PHOTO: A customer looks at liquor bottles for purchase at a liquor store in Gurugram, India December 11, 2023.(REUTERS)Karnataka recently rolled out a draft policy to alter the taxation structure on liquor sold in the state. The policy proposed taxing liquor based on the actual volume of alcohol present in it — or the Alcohol-in-Beverage taxation system, a popular practice in western countries.
If implemented as such, the policy will lead to an increase in prices of budget liquor while premium spirits are expected to see a slight drop in prices, according to a report by brokerage firm Nomura.
Karnataka
Currently, Karnataka levies the highest tax on liquor at 83% making the state one of the most expensive places to purchase liquor. The draft policy is expected to rationalise the prices by bridging the gap between budget and premium liquor.
The Karnataka government has invited objections and suggestions from industry stakeholders until 25 April. Vinod Giri, Director General of the Brewers Association of India, told NDTV Profit, “It’s a historic policy reform for alco-bev companies. AIB is truly the gold standard in alcohol taxation. It is based on the premise that the product to be taxed is alcohol and not the water that comes along with it.”
If enacted, Karnataka will be the first Indian state to adopt the Alcohol-in-Beverage (AIB) taxation model, maybe even paving the way for other states to follow its lead.
Where Liquor is Dear
Let’s take a look at other states where purchasing liquor costs the consumer dearly:
Maharashtra: has long been one of the states with the highest liquor prices, with an excise of 71% levied on Indian Made Foreign Liquor (IMFL). Last June, the state introduced a new policy to hike excise duty on IMFL and imported liquor, with an aim to generate an additional ₹14,000 crore in annual revenue. With this, prices have gone further up in the state.
This is followed by Rajasthan which levies a tax of 69%, Telangana with a tax of 68% and Uttar Pradesh with a tax of 66%.
Despite the high excise, however, Telangana leads all Indian states in liquor spending, with an average annual per capita expenditure of ₹1,623 on alcoholic beverages, according to a study by the National Institute of Public Finance and Policy (NIPFP).
Where Liquor is Affordable
Meanwhile, Goa continues to be the most affordable state for purchasing liquor, owing to its modest duty of 49%. This is followed by Delhi, which levies a duty of 62% and Haryana with 47%. It is important to note here that despite a higher excise duty, liquor remains affordable in Delhi due to rationalised MRPs. Meanwhile, despite a lower duty than Goa, liquor is more expensive in Haryana due to inflated MRPs.
Here is a cost comparison of popular liquors in different states, recently compiled by Condé Nast Traveller India:
Jack Daniel’s Honey (750ml)
Mumbai: Rs3,800
Delhi: Rs3,140
Goa: Rs3,000
Gurugram: Rs2,600
Stranger & Sons Gin (750ml)
Mumbai: Rs2,800
Delhi: Rs1,850
Goa: Rs1,600
Gurugram: Rs1,400
Absolut (750ml)
Mumbai: Rs1,460
Delhi: Rs2,350
Goa: Rs1,900
Gurugram: Rs1,600
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