In Panaji, the beer industry is looking forward to the 2024-25 budget announcement by Chief Minister Pramod Sawant, hoping for a reduction in the excise duty on beer. Over the past eight years, the excise duty on beer has seen a significant increase seven times, in contrast to just two increases for Indian-made foreign liquor (IMFL). This discrepancy, industry experts argue, could push consumers towards choosing hard liquor over beer.

During his last budget speech, Sawant mentioned that the government would hike the excise duty on IMFL, a category that accounts for more than half of the state’s excise revenue.

“Since 2017, the excise duty on beer has skyrocketed by 80%, while the duty on IMFL has only seen a rise of about 25%,” explained Anasuya Ray, Vice President of Corporate Affairs at AB InBev India. This has resulted in the price of a popular beer brand jumping from Rs 70 in 2017 to Rs 130 in 2023. Conversely, the price of a specific IMFL whiskey brand increased from Rs 200 to Rs 250 during the same timeframe.

The shift in taxation has led to a decline in the revenue contribution from the beer sector compared to the consistent growth seen in the IMFL category. In the financial year 2010-11, beer accounted for approximately 41% of the total excise revenue, a figure that dropped to around 25% in 2022-23. The overall excise revenue for Goa in the latter year was Rs 865 crore.

Internationally, beer usually faces lower taxes than spirits due to its lower alcohol content. However, the current 22% value-added tax (VAT) on alcoholic beverages in Goa significantly impacts both consumers and restaurant owners. “A Rs 350 cocktail becomes Rs 420 with the 22% VAT,” shared Gaurav Bhardwaj, founder of a bar in Benaulim, highlighting the burden of high taxation.

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The India Beer Market Outlook 2023 report indicated that the alcoholic beverage industry has been struggling with inflation and rising costs, leading to increased product prices. Meanwhile, at least seven Indian states have widened the price gap between beer and hard spirits to encourage a shift towards lower-alcohol options. States like Rajasthan and West Bengal have taken steps to reduce excise duty on beer and rationalize pricing, respectively.

“We are hopeful that 2024 will bring positive changes in the taxation policy, making it a better year for the beer industry,” Ray said, emphasizing the need for a more balanced approach to taxing low-alcohol beverages in comparison to hard spirits, as seen in states like Maharashtra and Karnataka.