Highest in India Driving Surge in Non-Duty Paid Liquor

The sharp rise in non-duty paid liquor (NDPL) cases across Telangana, is largely rooted in the high taxation rates prevalent in the state – highest in India. Currently, the tax levied on liquor in Telangana ranges between 140 percent and 250 percent with each bottle of alcohol attracting a tax of INR 70. This includes value-added tax (VAT) and excise duty.

In comparison, neighbouring states like Maharashtra impose an 83 percent tax. The tax in the majority of the others range between 70 percent and 80 percent.

According to sources, while the 70 percent VAT is constant in Telangana, the excise duty ranges from 70 percent to as high as 120 percent per cent. In case of foreign liquor, this excise duty can even go up to 150 percent pushing the total tax to a staggering 220 to 250 percent. "Not surprising then that Telangana along with Andhra Pradesh nets 15 percent of its total income from liquor sales alone. Southern states of Tamil Nadu and Karnataka aren't too far behind," said a source.

Goa, on the other hand, imposes the lowest excise duty of 49 ercent of the maximum retail price. This is supplementary to the 22 percent VAT applied to alcoholic beverages in the state. "This is done to encourage tourism," the source added, pointing out how this is a key reason for Telangana to record a 300% increase in NDPL cases in the last two years.

Most of those caught were found carrying bottles from Goa, apart from Delhi, Maharashtra or even Karnataka.

It is important to note that tax rates on liquor differ across states in India. Delhi, for instance, follows a system where the excise duty is based on the wholesale price of liquor. "In the premium segment, the prices in Delhi are, therefore, lesser than that in southern states," the source said.

Some states like Himachal Pradesh and Karnataka impose a state excise and sales tax on alcoholic beverages. In Karnataka, the sales tax is integrated into the excise duty as an additional charge on beer, Indian-made foreign liquor and wine. In the majority of the states, state excise accounts for over 75 percent of the total tax revenue derived from alcoholic beverages.

States with beverage corporations that exclusively manage wholesale distribution are yielding higher revenues from state excise taxes when compared to states where both wholesale and retail operations are conducted by public or private sectors.