Karnataka’s Spiraling Liquor Prices: Balancing Act Unraveled

Karnataka leads in high liquor prices with an 83% tax rate, creating a significant cost difference compared to Goa, impacting consumer spending and state revenue.

Karnataka’s Spiraling Liquor Prices: Impact on Revenue and Consumer Spending Unraveled

Karnataka has taken the lead in India for having the highest liquor prices and imposing substantial taxes on the maximum retail price (MRP) of alcohol, according to a report by The Times of India (ToI). The state imposes a hefty 83 per cent tax on the actual liquor price, making it significantly more expensive compared to other Indian states.

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The report highlights a stark contrast between Karnataka and Goa, where the price difference is striking. For instance, a bottle of non-beer spirit that costs Rs 100 in Goa can set you back around Rs 513 in Karnataka. This disparity is attributed to the high taxes and recent increases in liquor prices in Karnataka. In contrast, Goa boasts the most affordable liquor prices in the country.

Boosting Revenue

In a move to boost revenue, Chief Minister Siddaramaiah, in the first budget following the Congress government’s election in Karnataka, raised the duty on all 18 slabs of Indian Made Liquor (IML) by 20 per cent and on beer by 10 per cent. The excise department’s revenue target was also increased to Rs 36,000 crore.

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However, these measures seem to have had unintended consequences. The Federation of Wine Merchants’ Association in Karnataka reported a notable decline in both sales and revenues during the initial two weeks of August. Despite positive figures in July, the first half of August witnessed a 14.25 per cent drop in IML sales, with only 21.87 lakh boxes sold compared to the same period in August 2022.

Karnataka’s high liquor prices and taxes have had repercussions on consumer spending and state revenues, highlighting the complexities of balancing revenue generation and affordability in the alcohol industry.

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