Kerala Includes Low-Alcohol Tax Rates in Finance Bill, Implementation Not Immediate

The Kerala government has included revised tax rates on low-alcoholic beverages in the Finance (No. 3) Bill, 2026, set to be introduced in the State Legislative Assembly on July 1. This move comes amid a political controversy over the decision to lower sales tax on these drinks.

According to Section 3 of the Bill, the term 'low-alcoholic beverages' will be inserted after 'horti-wine' in the Kerala General Sales Tax Act, 1963. The proposed tax rates are 120% for beverages with alcohol content between 0.5% and 10% volume by volume (v/v), and 175% for those with strength exceeding 10% up to 20% v/v. These rates were first announced by Chief Minister V.D. Satheesan in the Revised Budget.

However, even if the Bill is passed, the amendment will not take effect immediately. The Bill stipulates that it will come into force only when the government issues a notification in the official gazette.

The announcement had sparked a major political storm, with the Opposition Left Democratic Front (LDF) alleging that it promotes alcohol addiction. Differences also emerged within the ruling United Democratic Front (UDF). In response, Chief Minister Satheesan informed the Assembly on Wednesday that a final decision rests with the UDF. He also noted that the LDF government had itself notified low-alcohol beverages as a new category in its 2022-23 liquor policy.

On Friday, Excise Minister M. Liju clarified that the sale of low-alcohol beverages would be based on the state's liquor policy, which is yet to be finalised, and that the decision would not be implemented immediately.