
Raise a Glass, Not Our Taxes: Stop the Beer Tax Hike


Dr.Ravishankar.J,IAS, Excise Commissioner
2nd floor of TTMC 'A' block,BMTC building,
Shantinagar, Bengaluru - 560 027 Phone#080-2222030
The purpose of this petition is to highlight to the Karnataka Excise Department and Ministry of Finance the widespread discontent and distress among beer consumers in the state over the unjustified tax increases imposed to compensate for deficits caused by poor administrative decisions by the government.
Since 2023, Karnataka has implemented several increases in beer taxation:
July 2023: The state government raised the additional excise duty (AED) on beer from 175% to 185%, resulting in a price increase of approximately ₹10 to ₹15 per 650 ml bottle.
February 2024: The AED on beer was further increased from 185% to 195%, leading to an additional ₹15 hike per bottle.
September 2024: A proposal was introduced to classify beer based on alcohol content, with higher excise duties for stronger beers. The proposed classification included:
Beer with 6.5% to 8% alcohol content: an increase of ₹20 per bulk litre. Beer with 5% to 6.5% alcohol content: a duty of ₹16 per bulk litre.
Beer with less than 5% alcohol content: duty remaining at ₹10 per bulk litre.This proposal aimed to align taxation with alcohol content, potentially increasing the price of stronger beers by around ₹15 per bottle.
October 2024: The Brewers Association of India appealed to the government to reconsider the draft proposal, expressing concerns that the cumulative effect of these tax hikes could make Karnataka one of the costliest states for beer, with prices potentially rising from ₹95 to ₹140 per bottle.
These successive tax increases have raised concerns among industry stakeholders about potential declines in beer sales and shifts in consumer behavior toward stronger alcoholic beverages.
Both hard and soft liquors are derived from agricultural products, and I consider wine and beer as soft liquors. Beer, with its low alcohol content of around 4%, can even be seen as a health drink when consumed in moderation. After all, even water can be harmful in excess. Beer is rich in antioxidants and minerals and contains about the same calories as a small snack, making it a healthier alternative to sugary soft drinks like Coke. If sugary soft drinks are not taxed like liquor, why should beer face such heavy taxation?
While it is common for all countries to impose taxes on both soft and hard liquors, Karnataka's recent tax hikes have reached punitive levels. These increases not only burden consumers but also significantly impact the profitability and sustainability of breweries in the state.
Toddy enjoys an exemption under the agricultural produce category, whereas beer is subjected to exorbitant taxation. Beer is produced from grains like barley, wheat, and rice. I firmly believe that people deserve a refreshing glass of beer after a hard day's work. It not only helps relieve body aches but also provides healthy calories when consumed responsibly. Instead of taxing existing beer consumers, the government should focus on encouraging hard liquor consumers to switch to beer. Expanding the beer consumer base would increase tax revenue while supporting farmers, who would benefit from better prices for their produce. This approach would create a win-win situation for everyone.
The adverse effects of excessive taxation are starkly evident in the steady decline of pubs across the UK and Scotland which are reportedly closing at an alarming rate of 34 per month. This trend highlights a significant issue: when the cost of a product or service surpasses what consumers can reasonably afford within their disposable income, demand naturally dwindles. In the case of pubs, rising prices driven by heavy taxation on alcohol and other operating costs are discouraging customers, prompting them to seek cheaper alternatives or reduce their consumption altogether.
This shift in consumer behavior has a cascading impact, starting with individual establishments that struggle to stay afloat. Over time, the closures of these pubs affect the broader hospitality industry, resulting in job losses, reduced revenue for suppliers, and diminished local economies, particularly in communities where pubs serve as social and cultural hubs.
The UK's pub closures also highlight a broader issue: the balance between taxation policies and their unintended consequences. While taxes on alcohol aim to generate revenue and address public health concerns, overly burdensome rates can harm businesses, limit consumer choice, and erode the social fabric tied to these historic establishments. Addressing this challenge requires a nuanced approach that considers economic sustainability alongside public policy objectives.
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