Kerala Government Defers Decision on Lowering Alcohol Tax After Protests
Kerala Chief Minister V.D. Satheesan announced on Wednesday that the state government's proposal to reduce sales tax on low-alcohol beverages would be put on hold pending consultations within the ruling United Democratic Front (UDF) alliance. The decision comes after widespread protests from UDF partners, including the Indian Union Muslim League, as well as from Muslim clerics and Christian church bodies, who expressed concerns that lower taxes could increase alcohol consumption in the state.
Satheesan, who also holds the finance portfolio, clarified that the budget proposal was only a tax measure, not a final policy decision. He stated, “The liquor policy will be decided by the UDF. We will hold discussions among the UDF allies. If the opinion is against selling low-alcohol beverages in Kerala, we will not sell that category of liquor.” He added that if the UDF decides to allow such beverages, the proposed tax rates would then apply.
The Chief Minister also addressed allegations of corruption made by the opposition CPI(M), which had accused him of accepting money from a Karnataka-based liquor company in exchange for lowering the tax. Satheesan countered by pointing to the previous CPI(M) government's own initiatives to allow low-alcohol beverages, noting that the excise department under then minister M.V. Govindan had begun defining such beverages in 2022-23. He also highlighted that the first Vijayan government in 2018 had set sales tax on foreign-made foreign liquor (FMFL) at 78 percent, while tax on Indian-made foreign liquor (IMFL) was later raised to 251 percent.
The budget proposal had aimed to reduce the tax on beverages with alcohol content between 0.5% and 10% by volume from 251% to 120%, and for those with alcohol content between 10% and 20% to 175%. Currently, all IMFL products in Kerala attract a uniform 251% sales tax, effectively preventing the sale of low-alcohol beverages due to the high tax burden. The deferral means that, for now, the existing tax structure remains unchanged.
