The Karnataka state government plans to adjust duty rates across the 18 slabs for Indian Made Liquor (IML) to safeguard its revenues and prevent trade diversion to neighboring states.
“In order to rationalise the tax slabs and make them competitive with neighbouring states, the tax slabs for IML and beer will be revised,” Chief Minister Siddaramaiah said in his budget speech.
In last year’s budget, the CM raised the additional excise duty (AED) on IML by 20% across all 18 price slabs, sparking protests from the industry. The International Spirits and Wines Association of India expressed concerns that the tax hike could drive consumers to purchase products from neighboring states via informal supply channels, adversely affecting licensed retailers’ businesses.
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The fears seem to have come true as the excise department has worked on a set of rates – increasing on brands in some slabs and lowering in others – to ensure people don’t buy from states with lower tax rates.
“After the rates are revised, the difference in prices between us and other states would be about INR 10 per bottle,” an official said.
The Excise department is also considering proposing adjustments to duties on beers, and some sections of distillers anticipate that certain beer brands may become more expensive as a result.
The excise department amassed revenues of INR 28,181 crore by the end of January 2023-24. For 2024-25, the government has set a target of INR 38,525 crore.
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