How India’s New GST Rates Affect (Or Don’t Affect) Alcohol Prices in 2025

The announcement of the latest tax reforms by India’s GST Council on September 22, 2025, sent ripples of excitement and curiosity across various industries and households. The GST slabs were consolidated from 5 slabs to three main rates: 5%, 18%, and a new 40% slab applied to sin and luxury goods, along with a zero-rated slab applied to a list of essentials. Many people started to ask whether this would bring down the cost of alcoholic beverages.

The answer is simple: not really. Alcohol remains outside the GST system for human consumption (that's the funny part!). The pricing of alcohol is still mostly defined by state excise duties, VAT, and state taxes. To understand why liquor prices remained unchanged overall, it is worthwhile to explore how the new GST rates operate, how alcohol is taxed in India, and what indirect taxes may exist anyway.

What Changed Under GST in September 2025

The GST overhaul simplified the tax structure for many goods, but alcohol was deliberately excluded. Key changes include:

• Cutting Tax Slabs: The 12% and 28% GST slabs were removed, so there will only be 5% and 18% for most consumer goods.
  
  
• 40% Sin and Luxury Goods Tax Slab: Focused on tobacco products, sugar beverages, and luxury goods (alcohol is excluded).
  
  
• Ease for Businesses: Manufacturers and retailers have minimal compliance burden and simplify tax calculations for eligible products, while liquor is still subject to the state tax systems.

Key Takeaway: While groceries, electronics, and personal care items may become more affordable, liquor prices are largely unaffected by the central GST reforms.

Why Alcohol Remains Outside GST

There are three main reasons why alcohol has stayed outside the GST framework:

1. Constitutional Autonomy

Item 54 of the State List in the Constitution gives states that exclusive power to tax alcoholic beverages intended for human consumption, essentially giving states both fiscal and regulatory control over liquor.

2. Revenue Dependence

Alcohol excise duties are a significant contributor to state revenue, often making up on average 13–15% of “own tax revenue.” If these taxes were to be removed or centralized in the federal government it would lead to a large hole in state budgets.

3. Policy Flexibility

States also use alcohol taxation as a tool to regulate consumption, discourage illicit sales, and implement policies tailored to local demographics and cultural considerations.

Key Takeaway: Liquor pricing is a state-level responsibility, making it independent of GST changes.

How Alcohol Is Taxed in India

Even though GST does not apply to liquor, there is a complex system of taxes and levies that affect the final retail price:

This layered approach is why prices for the same brand can vary widely between states.

Also Read: Delhi Government Plans to Lower Legal Beer Drinking Age to 21: What It Means for You

Why Prices Differ Across States

Alcohol prices are not uniform across India. Here’s a snapshot of state differences:

Key Takeaway: Consumers should expect state-level differences to continue dictating liquor prices, regardless of GST reforms.

Indirect Effects of GST on Alcohol

Even though liquor itself is outside GST, there are indirect ways the reform might affect costs:

• GST on Inputs: The amendments to GST rates on glass bottles, packaging, transportation, and other services may reduce production costs marginally.
  
  
• Supply Chain Efficiency: Differences in compliance and other costs for related inputs should prove beneficial to manufacturers marginally.

However, these effects are generally minor and will not meaningfully change the retail price for consumers.

What This Means for Consumers

For the average consumer, the implications are clear:

• No Immediate Price Cuts: Due to GST changes, your preferred whisky, rum, or gin will not be any less expensive.
  
  
• State Governments Remain Important: If alcohol prices do decrease, it will depend on the price set by state excise policy, nothing that relates to national GST change.
  
  
• Price Differences Remain: There continue to be price differences based on retail location, as it is common to find significantly cheaper alcohol prices in Goa than states like Karnataka or Maharashtra.

Tip for Consumers: If you want to save on liquor, tracking state excise notifications and promotional periods is more effective than waiting for GST-driven reductions.

Takeaways

1. GST 2025 Simplifies Taxes for Many Goods: Groceries, electronics, and other consumer products may see cost reductions.
   
   
2. Alcohol Pricing Remains State-Controlled: Excise duties, VAT, and other levies continue to determine MRP.
   
   
3. Indirect Effects Are Minimal: GST on inputs may slightly affect manufacturing costs, but it’s not a major factor.
   
   
4. Consumers Should Monitor State Policies: Excise hikes or reductions by state governments have a much larger impact than central GST reforms.
   

Final Thoughts

India’s GST overhaul in 2025 is a significant reform that clarifies taxes and reduces the cost of many products. But there will be little change for alcohol. State excise authorities have full power over pricing, which means that your next peg of whisky, rum or gin is going to cost about the same unless the state government decides differently. 

For consumers, recognizing the relationship of the state excise, VAT, and GST on inputs could help make informed decisions regarding the purchase of alcohol, especially in states where there are significant price differences.

Also Read: Bacardi White Rum Review 2025: Smoothness, Versatility, and Best Mixes