GST 2.0: What's In For Alcohol? Will It Be Cheaper Or Costlier?

On Wednesday, the Goods and Services Tax (GST) Council decided that the tax structure will comprise two slabs of tax: 5 percent and 18 percent. The new two-tier rate structure will be effective from September 22, as announced by Finance Minister Nirmala Sitharaman. The council shows slashing duties on many things, from toothpaste to insurance.  But what about Alcohol? Will it become more expensive or less expensive after the new GST rates take effect? Here’s what you should know. 

GST 2.0: Here’s What It Says About Alcohol

Alcohol will surely not become costlier because of the new GST rates. The reason behind this is that alcoholic beverages continue to remain outside the purview of the Goods and Services Tax in India as of September 2025. However, input costs for alcohol production and associated services have increased. This is because GST on the secondary goods and services has increased, which indirectly impacts alcohol prices.

The taxation powers with respect to alcoholic beverages for human consumption are still retained by the state governments. It is kept outside the GST regime as states levy excise duty, VAT, and other additional charges, which is why alcohol is a critical source of revenue at the state level. 

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Even as “sin goods” like cigarettes and aerated drinks are shifted to a new, higher 40% GST bracket, the new GST 2.0 reforms have left this regime unchanged. While alcohol itself is exempt, GST is still applied at 18% to all goods and services that are used in the alcohol industry.  This includes bottling, advertising, logistics, packaging materials, transportation, and equipment. 

Under the previous tax regime, the input goods and services were taxed generally at lower rates, but it has increased these costs to 18%. This results in higher production and distribution expenses that are often passed onto consumers as higher prices for alcoholic beverages.

Global Practices Vary From Country To Country

Each state determines its own excise regime and applicable taxes on alcohol, which vary widely across India. Although the new GST structure introduces substantial hikes for other “sin goods,” alcoholic beverages still face only pre-existing state-level taxes. 

Therefore, unless individual states decide to raise excise or VAT rates, there is no direct, immediate increase in alcohol prices due to the GST 2.0 reforms.

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There are countries such as Australia and New Zealand that actually include alcohol under a single national goods and services tax. But there are many other countries that consider it under a separate category of excise.

Alcoholic beverages are not subject to higher GST rates themselves, but the broader tax environment and increased input costs under GST can make alcohol gradually more expensive for consumers. 

Summing Up

The new GST rates will not have any direct effect on the surge in alcohol prices. But there can be indirect effects because of the goods and services used in the alcohol industry, as they come under the GST 2.0 regime.