BENGALURU: With the state budget slated to be presented in early March, the alcohol beverage industry has urged the State Government to set right the skewed excise duty structure and inconsistencies that is denting the revenue collection potential from spirits in Karnataka. The alcohol beverage industry has pointed out that Karnataka, which sells one of the highest bottled alcohol beverages in South India, lags in per case excise revenue collection as compared to other states.
For instance, in the financial year 2019-20, sale of spirits in Karnataka was 60.09 million cases and excise collection stood at Rs 21,584 crore, while in Telangana, 34.88 million cases were sold with excise collection standing at Rs 22,210 crore. Karnataka, despite selling almost 72 per cent more spirits than Telangana by volume, collected excise revenue just about 3 per cent lesser.
Experts said this is because a skewed excise duty made value/premium segment exorbitantly expensive. This led to encouraging binge drinking habits at lower price brackets, forcing premium segment consumers to source from neighbouring states where prices are lower. Alcohol industry veterans said due to this, in Karnataka, low-end liquor sale is very high, compared to any other major market in India, thereby contributing to lower per case revenue.
On the other hand, popular and premium Indian Made Foreign Liquor (IMFL) brands, which have high sale potential in the state, are witnessing muted sales owing to very high excise duty, probably the highest in India. Industry experts said harmonization of excise duty structure in Karnataka will be a win-win situation for both the State Government as well as consumers.
Besides helping the state get additional revenue, it will also give consumers access to spirits of their choice at better pricing within the state. It will also attract additional investment from existing and new players to set up production facilities as the state has a huge market waiting to be tapped. Besides, lesser slabs with harmonization will lead to long-term industry sustenance, they said.
Karunakar Hegde, Vice-President, Federation of the Wine Merchants Association (FWMA), Karnataka, said, “We are expecting the government to call a pre-budget meeting sometime next week. We have submitted proposals to the government asking them not to hike duty on IMFL. The percentage of profit here is meagre, because, with 10 per cent margin, it is very difficult to run the show. We have requested the government to hike percentage of profit also.”