Finance Minister Nirmala Sitharaman has clarified that bringing liquor for human consumption under GST is a decision that lies entirely with state governments. Speaking at the NDTV Profit GST Summit, she said, “It is up to the states… I can’t comment.”
Currently, liquor is taxed by state governments through excise duty on production and VAT on sales. This system brings in huge revenue for states, which is why they may be reluctant to let the Centre take over through GST.
For example:
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Delhi collected over ₹5,000 crore from liquor taxes this year, compared to just ₹210 crore from milk sales.
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Maharashtra earned ₹23,250 crore in FY24 and expects another ₹14,000 crore this year.
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Tamil Nadu made ₹48,344 crore in FY25, with sales controlled by the state-run TASMAC.
If liquor were taxed under GST, states could lose this vital revenue stream.
The issue of alcohol taxation has also been in the courts. Last year, the Supreme Court ruled that states have the power to legislate even on industrial alcohol, overturning a 34-year-old judgment.
Meanwhile, the price of liquor is expected to rise after the GST Council introduced a new “sin tax” on alcohol, tobacco, luxury cars, and other items. The council has also proposed new cesses — a Health Cess and a Green Energy Cess — to replace the old Compensation Cess.
The GST framework itself has been simplified. After 18 months of discussions, the government has reduced tax slabs from four to two: 5% and 18%. The 12% and 28% slabs have been scrapped, and several items like health and life insurance premiums are now fully exempt.
