Thiruvananthapuram: Liquor prices in Kerala will see a slight increase soon.

The government on Wednesday decided to waive the sales tax on liquor manufactured in the state. The retail price is being increased to offset the annual loss of Rs 150 crore caused by the tax waiver.

According to the officials concerned, a 2 per cent hike is being considered, which means consumers will have to pay an additional Rs 10 from the current prices.

The tax reform has been proposed to be introduced as an amendment in the next Assembly session.

At present, 13% of sales tax is added to liquor produced in Kerala. Distilleries had demanded the government waive this levy.

Owing to intensifying pressure, production had been cut down since August, resulting in many distilleries shutting down last month.

According to an Excise report, a severe shortage in cheap liquor would cause havoc in the state due to an increase in the flow of spurious liquor. Based on the report, the finance and excise departments were tasked with looking into the matter and the Cabinet assigned a chief secretary to study the team's findings. The government would then take a call based on the chief secretary's report.

Distilleries in the state say that with the price of spirits increasing sharply, they incur huge losses. Ever since the price of spirits rose from Rs 55 to Rs 75 per lire, small liquor manufacturers have been hit hard.

The price of liquor was last increased in February 2021. The price for a bottle of liquor went up from Rs 10 to as much as Rs 90. The state government imposed a hike of 7% in the base price.

When the price of a bottle increases by Rs 40, Rs 35 goes to the government in the form of various taxes, Rs 4 to the distilleries and Re 1 to the Beverages Corporation (BEVCO).

With the hike that came into effect last year, the price of foreign liquor, which the government procures for Rs 100, went up to Rs 1,170, including tax. Of that, Rs 1,049 goes to the government and Rs 21 to BEVCO.

This will increase further once the new reform is implemented.