On September 22, 2025, India’s Goods and Services Tax (GST) Council announced one of the most significant reforms since GST was first introduced in 2017. The number of tax slabs was reduced from five to three main consumer slabs (5%, 18%, and a new 40% for sin goods, in addition to the zero-rated category). Many consumers immediately wondered whether liquor prices would drop as a result. The short answer: no. Alcohol for human consumption remains outside the GST system, and its pricing continues to depend solely on state-level excise duties and taxes.
What Changed Under GST in September 2025
- The GST Council scrapped the 12% and 28% slabs, leaving just 5% and 18% as the standard rates.
- A new 40% slab was created for “sin” and luxury goods such as tobacco and certain non-alcoholic sugary or caffeinated drinks. Alcohol, however, was explicitly excluded.
- The reform is expected to reduce prices of many consumer goods, but it does not affect liquor MRPs.
Why Alcohol Remains Outside GST
- Constitutional Provision: Entry 54 of the State List in the Constitution gives states the exclusive power to tax alcoholic liquor for human consumption.
- Revenue Dependence: State excise on liquor is one of the largest sources of “own tax revenue” for states, contributing around 13–15% on average, though this varies.
- Policy Autonomy: States use liquor taxation not only to raise revenue but also to regulate consumption, discourage illicit sales, and tailor tax policies to local needs.
- Because of this, successive GST Council meetings since 2017 have kept alcohol outside GST despite industry discussions.
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How Alcohol Is Taxed in India Today
Since alcohol is not under GST, it follows a layered system:
- State Excise Duties – The primary tax levied at the production or wholesale stage.
- VAT/Sales Tax and Surcharges – Applied at the retail stage, varying widely across states.
- Other Levies – States may add license fees, transport duties, or special cesses.
- Customs Duties – Applied to imported liquor, in addition to state excise and VAT.
- GST on Inputs – While liquor itself is excluded, inputs such as glass bottles, packaging, and transport services are taxed under GST, indirectly raising production costs.
Why Prices Vary Across States
Because excise and VAT are set independently by states, prices for the same brand differ sharply across India:
- Goa: Among the lowest excise regimes, around 55% effective duty, making liquor relatively cheaper.
- Karnataka: Among the highest, with effective duties around 80%, contributing to some of the highest liquor prices in the country.
- Maharashtra: Recently approved an excise hike, with reports suggesting IMFL (Indian Made Foreign Liquor) prices could rise by up to 85% depending on category — though actual increases vary by product.
These disparities explain why a bottle of whisky might cost significantly less in Goa than in Bangalore or Mumbai.
What the New GST Means for Alcohol
- No Direct Change: Liquor prices remain untouched by GST reforms.
- No Inclusion in the 40% Slab: Unlike tobacco, alcohol was not moved into the sin goods category under GST.
- State Control Continues: Any future price hikes or cuts in liquor will depend entirely on state governments adjusting excise or VAT, not central GST policy.
- Indirect Impact Possible: GST rate changes on inputs (packaging, services) can marginally affect production costs, but these are not major drivers of MRP.
Summing Up
The September 2025 GST overhaul is a landmark reform that simplifies India’s tax landscape and cuts costs for many consumer goods. But when it comes to alcohol, nothing changes. Liquor remains firmly outside the GST framework, taxed only by state governments through excise duties, VAT, and surcharges. For consumers, that means liquor prices will continue to vary state by state, shaped by local policies rather than central GST reforms.
In other words: while your groceries may get cheaper under GST 2.0, your peg will cost the same — unless your state government decides otherwise.
