Kerala Government's Tax Cut on Low-Alcohol Liquor Stirs Political Controversy

The Kerala government, led by the United Democratic Front (UDF), has sparked a political controversy with its budget proposal to sharply reduce the sales tax on Indian-made foreign liquor (IMFL) with low alcohol content. The opposition Communist Party of India (Marxist) has accused the government of favouring a major liquor manufacturer.

Presenting the revised budget for the current fiscal year on Friday, Chief Minister V. D. Satheesan, who also holds the finance portfolio, announced that alcoholic beverages with an alcohol content between 0.5 and 10 per cent volume by volume (v/v) would attract a sales tax of 120 per cent. Products with alcohol content above 10 per cent and up to 20 per cent v/v would be taxed at 175 per cent. Currently, all IMFL products in Kerala are subject to a uniform sales tax of 251 per cent, regardless of alcohol content.

Satheesan cited the previous Left Democratic Front (LDF) government's 2022-23 abkari policy, which had permitted the sale of low-alcohol beverages in the state. However, the tax structure for such products had not been revised at that time.

Senior CPI(M) leader and former Excise Minister M. B. Rajesh accused the government of protecting 'certain interests' and claimed the decision could 'pave way for corruption'. 'Those who came to power after speaking against liquor are now making it more accessible, especially to the youth. By reducing the tax, the state will lose Rs 600 crore annually,' Rajesh alleged. He also claimed that the tax cut would primarily benefit a particular company that had made a similar demand before the previous LDF government.

Rajesh further stated that the previous government had allowed the sale of low-alcohol-content horti wine made from local fruits to help farmers. 'Though there was a demand to reduce the tax on horti wine, we fixed it at par with wine (86 per cent). The Congress government has instead reduced the tax on low-alcohol beverages made from spirit,' he said. He noted that while there was no issue with the sale of such beverages, the previous tax rate of 251 per cent made them unprofitable for companies.

Opposition leader Pinarayi Vijayan termed the tax cut 'mysterious'. 'In the past, higher taxes were imposed on IMFL to curb liquor consumption. This wrong liquor policy will push the youth towards alcohol addiction,' he said.

Meanwhile, Excise Minister and Congress leader M. Liju distanced his department from the proposal, stating, 'The excise department has taken no decision. The finance department has made a decision relating to sales tax. We have not taken any decision on the sale of low-alcohol-content beverages.'

The controversy highlights the ongoing debate between revenue generation and public health concerns in Kerala's liquor policy.