The 2024-25 State Budget for Kerala introduces thoughtful adjustments in its excise policy, particularly targeting the Indian-made foreign liquor (IMFL) sector, to bolster state revenues without burdening consumers.

By setting the gallonage fee on IMFL at ₹10 per litre, the government projects an additional revenue of ₹200 crore. This strategic move is part of a broader initiative to increase financial resources, ensuring that the impact on liquor prices remains negligible, thereby shielding consumers from price hikes. The policy doesn’t specify which brands will be affected by the price hike.

Finance Minister K. N. Balagopal’s assertion that the hike will not affect liquor prices reflects a diplomatic balance between enhancing state revenues and safeguarding consumer interests. This adjustment in the excise policy demonstrates the government’s nuanced approach to fiscal management, aiming to boost state income through the liquor industry while maintaining a stable market environment for consumers.

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Key highlights of the new excise or liquor policy include:

  1. Increased Excise Duty: The duty on IMFL has been increased by Rs 10 per litre as a strategy to raise additional funds for the state.
  2. Social Security Cess: A new cess has been introduced on IMFL. Bottles priced between Rs 500 to Rs 999 will now carry a Rs 20 cess, and those above Rs 1000 will have a Rs 40 cess. However, due to taxation on this cess, consumers will end up paying Rs 30 and Rs 50 extra, respectively.
  3. Support for Alcohol Production: The policy supports the enhancement of the state’s alcohol production by planning to reopen closed breweries and increase the production capacity of existing ones.
  4. More Licenses: There’s a plan to issue more licenses for foreign liquor retail outlets and to introduce pub licenses in IT and industrial parks, aiming to liberalize the sale of alcohol.
  5. Taxation Structure: The excise duty on liquor is calculated based on slabs that range from 21.5% to 23.5% of the cost per proof litre, with the maximum rate set at Rs 237 per proof litre.
  6. Sales Tax Revision: Alongside the excise duty adjustments, the sales tax on liquor has also been revised, which is expected to further increase the revenue from liquor sales.

This comprehensive approach is part of the broader fiscal measures introduced by the state, including the implementation of social security cesses on fuel and liquor, as well as tax hikes outlined in the 2023-24 budget. These changes have led to a rise in the prices of petrol, diesel, and liquor, causing public debates and protests over the increased financial burden on consumers.

The Kerala Finance Minister, KN Balagopal, revealed these plans during a budget speech, emphasizing the government’s commitment to attracting significant investments and supporting local agriculture, alongside the liquor policy changes aimed at enhancing state revenue.