The Ministry of Finance has announced a 6% increase in excise taxes on all categories of alcohol, effective from midnight on January 10. This price hike is expected to significantly impact retail prices, with the cost of a bottle of special arrack (gal arrack) rising by approximately Rs. 106.
Impact on Alcohol Prices
The excise tax hike comes amid a decline in alcohol consumption, attributed to the ongoing economic challenges. This has led to a notable drop in government excise revenue, prompting the latest measure to boost income.
Cigarette Price Increase from January 11
In addition to alcohol, cigarette prices will also increase starting January 11, with the hike categorized as follows:
- Capstan and John Player cigarettes: Increase of Rs. 5 per stick
- Dunhill, Gold Leaf, and Mimi 83 cigarettes: Increase of Rs. 10 per stick
These adjustments are part of the government’s broader strategy to enhance revenue collection in response to fiscal challenges.
Economic Context
The government has faced declining excise revenues due to reduced alcohol and tobacco consumption amid rising living costs. The latest price revisions aim to mitigate this revenue shortfall while balancing public health considerations.
While the new pricing may contribute to increased government revenue, it is also expected to impact consumer behaviour and affordability, particularly among low-income groups.