Indian states have a conflicted relationship with booze, with some imposing abstinence and others promoting tourism. The introduction of the Goods and Services Tax (GST) in 2017 left states without the ability to set taxes in response to their own needs, leading to increased indebtedness. To address this, some states have turned to taxing alcohol, but with a twist: they must balance the need for revenue with the need to avoid promoting drinking.
Karnataka, a state in southern India, has taken a rational approach to alcohol taxation. Its draft report recommends switching to a system based on the amount of alcohol in the bottle, regardless of what it calls itself or how it is marketed, plus a form of consumption tax. This system is similar to those used in countries like Australia and Britain.
The report is likely to be copied by other states, as successful policies spread quickly in India's federal system. This could be a relief for drinkers of beer, wine, and premium spirits, and a victory for common sense. The reform is also expected to surge revenue, with insiders predicting a significant increase.
