How much do states earn from liquor taxes?

States earning from alcohol

A minister in the Odisha Cabinet on June 27 announced that the state was planning to impose a ban on liquor, but the government was quick to dismiss such reports.

While four states in the country have imposed a complete ban on liquor, excise duties, which are imposed on liquor, account for a significant share of the states’ own tax revenues.

In case of Odisha, a ban on liquor may become more untenable as it earns a larger share of its own tax revenue from liquor than the national average.

According to the vote-on-account presented by the previous government, Odisha is set to earn Rs 8,680 crore from alcohol revenues in FY25, which would account for 14.7 percent of the state’s own tax revenues compared with 13.8 percent share in the previous fiscal.

In contrast, a Moneycontrol analysis shows that the average excise duty to own tax revenue ratio for 19 of the largest states and UTs is expected to be 13.7 percent, unchanged from revised estimates of FY24 and only marginally higher from 13.5 percent share in FY23.

Odisha is among the five states expected to witness a significant jump in their excide duty earnings. Data shows that Assam’s share of alcohol revenues is expected to grow nearly 2 percentage points in FY25.

The same for Telangana is set to increase 1.7 percentage points, as the alcohol revenue growth at 28.8 percent pips own tax revenue growth of 17.6 percent.

Further analysis shows that Maharashtra, Tamil Nadu liquor revenues account for less than 10 percent of the own tax revenues, in contrast, in five states — Chhattisgarh, Jharkhand, Karnataka, Uttar Pradesh and West Bengal — liquor revenues accounted for a fifth of own tax revenues.

In the case of Jharkhand, excise duty was a quarter of the state’s earnings in FY24.

Reliance on liquor as a source of income across states has grown after the pandemic.

While liquor accounted for 11-12 percent of the states’ total revenues before the pandemic, the ratio has increased above 13 percent in FY24.