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On June 24, the Karnataka government was encouraged to take into account rationalising the additional excise charge on premium goods by the International Spirits & Wines Association of India (ISWAI), the leading organisation in the Alcoholic Beverages (AlcoBev) industry.

The current taxation structure in the state has resulted in India-Made Foreign Liquor (IMFL) consumption being skewed towards the cheap segment due to the significant MRP differences between the cheap and the premium AlcoBev products where "cheaper brands are far cheaper, and the premium brands are far costlier than in other states," it claimed.

Despite the fact that Karnataka is one of the states in India with the highest consumption of alcoholic beverages, ISWAI asserted in a statement that states with lower consumption are collecting relatively greater excise revenue than Karnataka.

"Despite favourable conditions (in the state), premium alcohol products have seen a consistent decline in consumption in the last 4-5 years. This is primarily because Karnataka has the highest tax rates," ISWAI CEO Nita Kapoor said.

Kapoor said another pain point is the "obsolete slab structuring" which was last expanded six years ago and needs a revision.

An earlier study by the National Council of Applied Economic Research (NCAER) estimated the overall tax burden and elasticity of alcohol product taxes over the previous ten years in seven States, including Delhi, Madhya Pradesh, Sikkim, Maharashtra, Bihar, Karnataka, and Himachal Pradesh, which represent different regions of India.

The NCAER report's analysis was based on a review of State-level price mechanisms, taxation structures, sales and consumption trends related to various types of alcoholic beverages, as well as the effects on revenue generation of a State-level increase in alcoholic beverage taxes over the previous 10 years.

Despite the ambivalence and proxy marketing that plague India's alcohol industry, many states paradoxically see large tax collections from the sale of alcoholic beverages.

For instance, the research division of the analytical and ratings firm CRISIL discovers that more than 10% of the tax revenue in the five southern States of Andhra Pradesh, Telangana, Tamil Nadu, Karnataka, and Kerala comes from taxes on liquor sales, the study says.

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