Karnataka Budget 2017: VAT on alcohol abolished, stocks soar

BENGALURU: In a positive news for liquor stocks, Karnataka Chief Minister Siddaramaiah abolished value added tax on wine, beer, wine and hard liquor in the state's budget.

Stocks of United Breweries, United Spirits rose up to 2.75% while Radico Khaitan, Globus Spirits rose more than 4% in intra-day trade on Wednesday.

Stocks of some companies such as United Spirits could see a re-rating said analysts, as 25% of the company's revenues come from Karnataka. However liquor companies may face tricky prospects with the implementation of the Goods and Services Tax. In a recent note brokerage firm Nomura said "While other FMCG categories benefit from input credits being offset by the introduction of GST, taxes on alcoholic beverages have been carved out as an exception to this law."

Nomura downgraded United Spirits to neutral from buy based on near term pressures on earnings and on competition toughening between the company and rival Pernod Ricard SA.