Karnataka govt denies drop in liquor sales due to tax hike

The Karnataka state government on Monday dismissed the fall in liquor sales in the last days of July as a usual occurrence and insisted it is not indicative of a sedate demand as a result of increase in taxes on liquor. Chief Minister Siddaramaiah in his budget on July 7 increased the additional excise duty (AED) on Indian made liquor (IML) by 20% across all the 18 price slabs, sparking protests from the industry.

The International Spirits and Wines Association of India feared the increase in taxes might lead to people buying products from neighbouring states through informal supply chains, hurting business of licensed retailers.

The CM has fixed a target of Rs 36,000 crore from liquor and beer sales in his July 8 budget. The revised rates of taxes came into effect from July 20. The Excise department maintained that retailers lift surplus advance stock from the Karnataka State Beverages Corporation (KSBCL) days before the revision in taxes are announced by the government, and will go on selling them after the revised tax rates kick in.


It is because of this trend, noticed almost every year, that the offtake of liquor cartons from the state-owned master distributor KSBCL is poor for some time after the revised taxes take effect. This is only a temporary phenomenon, and the offtake will swing back to normal after a few days, the statement from the Excise department said.

The department has, from April 1 to August 25 of this fiscal year, collected Rs 13,515 crore in taxes, which accounts for 37.5% of the targeted revenue. The collection so far has indicated a growth of 13.7% in revenue over the same period last year, the Excise department said, while pledging to meet the revenue target as fixed by the CM.

The budget estimates the five guarantee schemes would need about Rs 52,000 crore for an entire year, and the government has tapped the liquor industry to partly fund the ambitious programmes.