United Spirits brands to cost more in Karnataka

economictimes.indiatimes.com:

United Spirits, the country's biggest liquor firm, said price tags for its brands will go up by 14-17% in Karnataka after the state announced a 20% increase in additional excise duty (AED) on Indian-made liquor (IML) from August. With annual sales of 68.4 million cases, Karnataka is the largest alcohol consuming state accounting for 18% of India's overall sales. This is despite the state having the highest tax rate on liquor in the country.

«This was not a welcome tax increase. The tax rates in Karnataka are already much higher. A 20% tax increase, in effect means that MRP of our brands will likely go up in the range of 14 to 17%.

So, they become even more expensive in the state than they were already,» Hina Nagarajan, managing director at USL, told investors. «It's too early to call out the impact on demand but our experience suggests there is generally a negative impact when prices go up.» Over the past few quarters, mass-priced segments have been under pressure due to inflation even as consumers shift to premium products. For USL, volume growth in the popular segment declined 12% though the overall, the company expanded 6% by volume.

In India, several state governments either control liquor retailing or wholesale distribution or both, and taxes form a major source of their revenues. More than 50% of the retail price goes to state and central governments by way of VAT and excise duty. The excise revenue from liquor sales in Karnataka was around ₹30,000 crore in 2022-23.