Kerala government considers turnover tax exemption for breweries
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The file currently under review pertains to KALS Breweries Pvt Ltd — a brewery operating in the state — and has reached the ministerial level, signalling that a final decision is imminent.
The move follows the state's decision in Dec 2022 to waive the 5% ToT on sales by distilleries to the Kerala State Beverages (Manufacturing and Marketing) Corporation. At that time, the govt cited public interest while invoking powers under Section 10 of the Kerala General Sales Tax Act, 1963.
However, to cushion the revenue loss, the govt increased the sales tax on liquor by 4%. It resulted in a modest hike in Indian made foreign liquor's retail price, with most brands becoming costlier by Rs 10 to Rs 20.
Now, a similar outcome appears likely with breweries as well. If the govt proceeds with granting ToT exemption to KALS Breweries, it could again result in a minor upward revision of retail liquor prices, unless alternative tax adjustments are introduced.
While no official confirmation has been made, multiple layers of administrative action within the govt indicate that the matter is being taken forward with serious intent.
An official digital record from the state's e-office system confirms the status of the request. A file titled "Representation from KALS Breweries Pvt Ltd for exemption of turnover tax" was formally opened on Nov 22, 2024. The file's internal movement offers a glimpse into how tax exemption proposals are examined and escalated within the state's bureaucratic framework.
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On June 6, 2025, the joint secretary concerned in the taxes department made the file's two successive transfers to additional chief secretary (taxes) K R Jyothilal.
The very next day, Jyothilal forwarded it to finance minister K N Balagopal, who, on the same day, passed it on to his additional private secretary. This sequence makes it clear that the proposal has reached the top political office in charge of taxation and fiscal matters in the state, in a relatively top speed for the movement of a govt file on policy matter.
The 2022 exemption for distilleries was issued through govt order on Dec 1, 2022. The explanatory note attached to the notification described the move as being in the public interest, offering a policy rationale that the govt is likely to repeat while extending the same exemption to breweries. What makes this latest development particularly significant is its potential to establish a lasting policy precedent. If KALS Breweries is granted exemption from ToT, it will logically follow that any new brewery sanctioned in the state in future will also be entitled to the same benefit.
This becomes crucial given the politically sensitive nature of licensing new breweries in the state.
The idea of relaxing taxes for alcohol manufacturers has traditionally drawn criticism from various quarters, including public health advocates and opposition parties. However, from the govt's point of view, ToT exemptions serve as a fiscal tool that simplifies the taxation structure and encourages investment in the manufacturing sector. Given the precedent from 2022, when the removal of the turnover tax for distilleries was balanced with an increase in sales tax, a similar route may be adopted again.
If so, consumers can expect a small increase in the price of beer and other brewed liquor brands in the near future.
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