BENGALURU: A bottle of whisky or brandy will cost you more in Karnataka beginning April, but cheer up if you aren’t a compulsive connoisseur of hard liquors and can live on beer and wine.
Karnataka Chief Minister Siddaramaiah, who is also in charge of planning the State’s finances, on Wednesday proposed in his Budget for 2017-18 abolishing the 5.5% value added tax collected on wine, beer and hard liquors purchased at restaurants and bars. But instead, he has proposed increasing the additional excise duty levied on liquor to 21% from 18%.
Effectively, this will increase prices of liquors such as whisky, brandy and vodka by 4.5% to 12.5%, depending on which government price slab a particular beverage is categorized under.
With this, the government is aiming to mop up Rs 18,050 crore for the Excise Department in fiscal year 2017-2018, up from Rs 16,510 crore in the year ending March 31. Revenue collection through liquor sales for Karnataka was about Rs 14,500 crore as at the end of February, according to industry data.
The additional revenue from the increased excise duty will compensate for the waived-off value added tax, which would have had to go anyway whenever the Union government implements the new Goods and Services Tax regime, likely from June or July.
The changes will affect several spirits companies including Amrut, I Brands and India’s largest liquor company, United Spirits, which gets 25-30% of its volume sales from Karnataka. The Diageo-backed company sells whisky brands such as McDowells No.1, Signature and Royal Challenge.
United Spirits declined to comment immediately as it was still analysing the Budget.
Industry experts expect that the move, clubbed with water scarcity and low sugarcane production in the state that would affect liquor production, could lead to a dry spell in Karnataka, hurting its revenue.
“For the last two years the liquor market (in Karnataka) has been stagnant,” said Arun Parasa, president of the Karnataka Brewers and Distillers Association. “The segment is growing at 0.5%, from 3.5% two years ago.”
Restaurateur and bar owners, however, welcomed the Karnataka government’s decision to abolish VAT.
“The unorganised sector did not pay their VAT efficiently. This was unfair on the organised sector. With the VAT waived off, there is no room for leakage now,” said Riyaz Amlani, president of National Restaurant Association of India and owner of restobar Social.