The Karnataka state government on Monday brushed aside the decrease in liquor sales observed in the last days of July as a routine phenomenon. They asserted that this dip does not necessarily indicate reduced demand due to the recent tax hike on liquor. Chief Minister Siddaramaiah had announced a 20% increase in the additional excise duty (AED) on Indian made liquor (IML) for all 18 price categories in his budget on July 7, a move that sparked protests within the industry.
The International Spirits and Wines Association of India expressed concerns that the tax hike could potentially drive individuals to purchase items from neighboring states using unofficial distribution channels. This could negatively impact the operations of licensed retailers.
In his July 8 budget, the Chief Minister set a goal of INR 36,000 crore in revenue from liquor and beer sales. The updated tax rates became operational on July 20. The Excise department clarified that retailers procure excess inventory in advance from the Karnataka State Beverages Corporation (KSBCL) in the days leading up to tax revisions announced by the government. They will subsequently continue to sell these stocks even after the revised tax rates come into effect.
Due to this recurrent pattern observed nearly every year, the demand for liquor cartons from the state-owned primary distributor KSBCL tends to decrease for a period following the implementation of revised taxes. The Excise department statement clarified that this is a transient occurrence and the demand is expected to return to its regular levels after a few days.
During this fiscal year, from April 1 to August 25, the department has gathered INR 13,515 crore in taxes, representing 37.5% of the intended revenue. The collected amount reflects a 13.7% increase in revenue compared to the corresponding period of the previous year, as stated by the Excise department. They further affirmed their commitment to achieving the revenue goal set by the Chief Minister.
The budget anticipates that the five guarantee schemes will require approximately INR 52,000 crore for a full year, and the government has looked to the liquor industry to contribute partially to the funding of these ambitious programs.