Wondering How New GST Rates Affect Alcohol Prices? Here’s What You Need to Know
Wondering How New GST Rates Affect Alcohol Prices? Here’s What You Need to Know
Liquor remains outside GST; state taxes to continue determining prices
With the government new GST rates from September 22, many consumers are asking whether alcohol, along with petrol and diesel, will become cheaper. The short answer: no.
Under the revised rules, GST has been simplified to just two slabs—5% and 18%. Nearly 99% of items earlier taxed at 12% now fall into the 5% bracket, while about 90% of items previously at 28% have moved to 18%. In addition, a special 40% slab has been created for so-called “sin goods” like tobacco and luxury products. This restructuring is expected to make several daily-use items cheaper for the public.
However, alcohol remains completely outside the GST framework. Since the launch of GST in 2017, successive Council meetings have avoided bringing alcohol under its ambit, primarily because liquor is one of the largest revenue sources for state governments. Excise duties and VAT on alcohol contribute between 15% and 25% of states’ own tax revenues, funding welfare and development programs.
Currently, liquor is taxed through a layered system of state-level excise duties, VAT, and additional surcharges or cesses, depending on the state. This explains why prices vary widely across India—from Goa, which levies the lowest excise duty at around 55%, to Karnataka, which imposes rates as high as 80%.
Unlike tobacco products, which have been shifted to the 40% GST slab, alcohol has been left untouched. Experts say that if alcohol were subsumed under GST, states would lose autonomy over one of their most dependable revenue streams.
The situation is similar for petrol and diesel, which also remain outside GST and continue to be taxed separately by the Centre and states.
Liquor prices will not change under the new GST system. Alcohol will continue to be taxed by state governments, meaning any future price changes will depend solely on state-level excise and VAT decisions, not central GST reforms.
