The Bengal government has tweaked the excise duty structure by adding a new levy, lowering the number of declared price slabs and marginally raising the additional excise duty that is expected to result in an average price rise of 5-20 per cent for consumers.

The MRP of liquor in Bengal is determined based on the declared price, excise duty, additional excise duty, registration fee for production, distributor margin, wholesaler margin, retailer margin and a special purpose fee that the state imposes to encourage responsible drinking.

In a notification dated July 10, 2024, a duty of ₹5 per bulk litre on extra neutral alcohol (ENA), a key ingredient in the manufacture of India Made Foreign Liquor (IMFL) across categories like whisky, vodka and rum has been introduced. While excise duty has been kept unchanged at ₹50 per bulk litre, additional excise duty has been increased, in a bid to shore up revenue during the upcoming festive season.

The number of declared price slabs per case (9 litres each) has come down from 17 to 15, with the state doing away with the slabs of ₹0-649 and ₹650-699 which existed under the old structure. The increase in additional excise duty in the remaining slabs is in the range of 0.75-5.08 per cent from the 2021 notification, except in the ₹0-799 slab where there is a decrease of 8.3 per cent.

In case of beer, the number of declared price slabs and the excise duty have been kept unchanged. But the additional excise duty has increased in the range of 4-40 per cent for strong and mild beer.

“The change of AED and MRP round-off ceiling provided under this notification shall be made applicable in respect of products registered on or after the date of effect of this notification and all existing and previously registered products lying unsold at any end, including those against which requisition of import has already been made, shall be allowed to be liquidated against rates with which such products were earlier registered,” the excise notification says.

“The excise duty rates have not been changed for a long time. Before the state budget back in February, there was already a consideration on whether the excise duty on liquor could be increased. But it was held back,” a government source said.

The state government has collected excise revenue of ₹18,851.06 crore in 2023-24 and has budgeted for a 16 per cent growth at ₹21,846.36 crore in 2024-25.

The exact impact of the hike on each brand of liquor will be known next month when the new labels are registered and the fresh stock comes into Bevco warehouses for distribution among retailers.

“The general anticipation is that there would be a price rise in the range of 5-10 per cent on foreign liquor and could be even higher in beer as the manufacturers themselves are in no position to absorb higher duties because of an increase in input costs,” said an industry source.

“It is not just an increase in additional excise duty, but there is also a new levy on ENA. More on the actual increase will be known in August when the new prices become effective,” the source added.

The latest amendment has increased additional excise duty rates for the fast-moving strong beer segment by 20-30 per cent and for milder beer segment by up to 40 per cent. "As a result, beer prices in the state are expected to rise by 20 per cent or more, with premium segments being the most affected. Since the IMFL segment will see an impact of only 5 per cent on MRP, this move may lead to a shift of consumers from mild alcoholic beverages like beer towards harder spirits. That contradicts the government premise of supporting milder alcoholic beverages,” said Vinod Giri, director-general of the Brewers Association of India.

“One hopes policymakers realise this and make the necessary corrections in this regard,” he added.

The excise duty changes come at a time the state has rolled back sops given back in 2021 on property registration and motor fuels.

Bengal is not the only state to effect a hike in excise duty on liquor. The Karnataka government proposed a 20 per cent rise in additional excise duty on liquor in its budget in January.

The Telegraph reported last week that the industry body National Restaurant Association of India was expected to meet state excise officials in August with a set of proposals, including a relook at the hefty registration fees and higher duties on draught beer among others.