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Karnataka Budget 2019: End of Pub Capital tag?



Bengaluru: Happy hours are over. The beer that chilled Bengalureans’ weekends will now singe their pockets after Chief Minister H.D. Kumaraswamy doubled the Excise and Additional Excise Duty (AED) on beer; bottle, draught and artisanal in his second Budget, which he presented on Friday.

“Beer has become the proverbial golden goose for the government because of its huge popularity among Bengalureans. It is a wrong move to increase the beer prices. It will further slow down the Food and Beverage (F&B) industry in Karnataka, especially Bengaluru, which is already under a lot of stress. Lots of pubs and bars have shut down because running an F&B in the City doesn’t make business sense anymore,” voiced the owners of some leading resto-bars, pubs and clubs in the City.

The 2019-20 State Budget has pegged the revenue target for Excise Department for the financial year 2019-20 at `20,950 crore as against Rs 19,750 crore for 2018-19.

The Budget has increased the AED on beer (bottle) from 150 per cent to 175 per cent. The AED on draught beer has gone up from 115 per cent to 150 per cent. Excise duty on beer, which is brewed in microbreweries has been scaled up from the existing Rs 5 per barrel litre (BL) to Rs 10 per BL and the AED has been increased from Rs 12.50 per BL to Rs 25 per BL.

Excise duty on low alcoholic beverages (eg. wine and breezers) has gone up from Rs 5 per BL to Rs 10 per BL and the AED on them has also been revised from the existing 122 per cent to 150 per cent. The increased Excise and AEDs on beer would mean that a 500 ml mug of artisanal beer, which is priced between Rs 250 and Rs 275 in microbreweries, will now cost Rs 300 and odd.

“They have turned beer into a revenue engine in this Budget. Earlier the government tried hard to hard sell Indian Made Liquor by levying huge amount of Additional Excise Duty (AED) on it and the Excise licensees are under pressure to lift a certain amount of IML cases every month but it is impossible for us to sell so much IML. Beer on the other hand has been the best seller throughout the year with the result that Bengaluru alone has 52 microbreweries and some more are in the pipeline. While beer has the potential to drive Excise revenues higher, it’s not a smart move to double the taxes on the drink because it would adversely impact the spending power of people. Why tax the poor beer?” asked the owner of a prominent microbrewery in the City.

Government has however, countered the allegations of the licencees.

“The increase in the Excise and AED on beer is on the declared price. It is marginal and will hardly have any impact on beer sales and consumption. The government had levied 12 per cent duties on IML last year. They had spared beer. Under the new tax regime there would be an increase of Rs 5 for a pint of beer at best,” said a senior Excise officer.

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