The Kerala government has rejected the request of the brewery owners to exempt them from payment of turnover tax (ToT). The Department of Taxes received three representations between 2023 and 2024 from United Breweries Limited, KALS Breweries Private Limited and the Brewers Association of India on the exemption of ToT.

In response, the department has informed that the exemption of ToT payable under the Kerala General Sales Tax Act, 1963, is applicable only to the distilleries in the state which sell liquor manufactured by it within the state to the Kerala State Beverages (Manufacturing and Marketing) Corporation Limited.

In 2022, the government exempted the distilleries in the state from paying ToT. The ToT at the rate of 5 per cent was applicable on the sale of foreign liquor from the distilleries in Kerala to the KSBC. The department said in the letter to the breweries that the ToT was abolished for distilleries alone as the price of Extra Neutral Alcohol (ENA), a primary raw material for producing alcoholic beverages, had gone up since Kerala did not have an ENA production facility within the state.

The exemption on ToT for distilleries was made based on a cabinet decision in 2022. As per the minutes of the meeting, an approval was given to abolish the 5 per cent imposed on the distilleries, which are involved in the production and marketing of foreign liquor, to make 5 per cent hike in the sale tax charged on foreign liquor as per the Kerala General Sales Tax Act 1963 and to make 1 per cent increase in the warehouse margin charged by KSBC.

 It was also decided to keep the price of the foreign liquor procured by KSBC from distilleries unchanged and the cabinet decided to hike the price of imported foreign liquor by 2 per cent. The cabinet also agreed that a bill would be introduced in the state Assembly to bring an amendment to the Kerala General Sales Tax Act 1963, as a 4 per cent increase was needed on the Kerala State Common Sales Tax rate, chargeable on foreign liquor. The loss of revenue due to the scrapping of ToT was calculated between ₹160 crore and ₹180 crore per annum.