Karnataka to reduce price of premium liquor to boost sales

To rationalise tax slabs and make them competitive with neighbouring states, the tax slabs for IML and beer will be revised, said CM Siddaramaiah.

The Karnataka government has decided to reduce the excise duty on the premium liquor in the state to compete with the liquor prices in neighbouring states and the revised rates are likely to be finalised by June, said officials familiar with the matter.

The revised excise duties are likely to be finalised by June, said officials (Mint)

“In order to rationalise the tax slabs and make them competitive with neighbouring states, the tax slabs for IML and beer will be revised,” said chief minister Siddaramaiah on Friday in his budget speech.

While the budget copy didn’t specify which tax slabs will be reworked, bureaucrats in the know of the development said that the government has identified “categories in high-end liquor, which will be made cheaper”. The revised excise duties are likely to be finalised by June, said an official familiar with the matter.

“In some of the slabs at the top end, our liquor rates are priced incompetently. To give a rough example, some liquor brands that cost around ₹5,000 in the neighbouring states, cost as much as ₹7,000 in Karnataka. Because of this, we are losing sales. So these prices will be rationalised,” said the bureaucrat, who did not want to be named.

He said that in the premium liquor segment, the state’s sales is only around 2-3%, while in states such as Telangana, the high-end liquor sales account for more than 50% of sales. “From our studies, we have found that by reducing the tax on premium liquor, we can earn more revenue. We have also seen cases where people are travelling to neighbouring states to buy these high-end brands, ” he added.

He, however, added that there will be a relatively minor price hike in cheaper liquor brands.

The officer said that the fine print on the changes is yet to be finalised and the discussions are underway with the excise department. “The decision is likely to be finalised by the beginning of the excise financial year (June),” he added.

Meanwhile, the revenue collection target for 2024-25 for the excise department has been fixed at ₹38,525 crore. In 2023-24 the target was ₹36,000 crore, out of which until January 2024, ₹28,181 crore tax revenue was collected, according to people familiar with the matter.