A single line in the revised Kerala Budget has reopened the oldest argument this State has with itself. The line cuts the tax on a class of drink the law calls low alcoholic beverages, and it now sits inside a Finance Bill due before the Assembly on July 1. Most of the conversation around it has been about who gains and who is embarrassed. I want to set that aside and ask the two questions a lawyer is trained to ask. What does the law allow the State to do here, and what should it choose to do. The answers point in directions that do not meet, and that gap is the real story.
What the Budget did
A bottle of whisky, rum or brandy sold in Kerala carries around 42 percent alcohol and is taxed at 251 percent. The revised Budget fixed a much lower rate for drinks of up to 20 percent alcohol, 120 percent for those up to ten percent and 175 percent for those between ten and twenty. The category of low alcoholic beverages is not new. It was created in 2022, when the Foreign Liquor Rules were amended to define drinks between half a percent and twenty percent alcohol, leaving out beer and wine, as a separate class. The Budget did not invent the category. It put a price on it. The government says that fixing a tax is not the same as deciding to sell these drinks, and that any actual sale will need a separate clearance from the excise side. On the text of the law, that distinction holds.
A category born in a horticulture file
It helps to remember why this class of drink was created at all. The idea arrived wearing a farmer's clothes. Kerala would let small wineries turn pineapple, banana and cashew apple into a light fruit wine, giving a grower a second buyer for produce that often rots for want of one. Read that way, a low alcohol category is a modest piece of agricultural policy. The difficulty is that the same legal shelf built for fruit wine is wide enough to hold something very different, a sweetened, branded, ready-to-drink product manufactured by a multinational and sold by the crate. A frame raised for horticulture can, through one tax notification, become the route to market for an industrial drink that never came near an orchard. The spirit that began in a farm file ends diluted and bottled for the shelf.
The law gives the State almost a free hand
Here is the part that often surprises people who treat this as a close legal question. It is not. The State's power over liquor is among the widest it holds anywhere in our constitutional scheme. The Supreme Court has held for decades that there is no fundamental right to trade in liquor, because potable liquor is treated as res extra commercium, a thing kept outside ordinary commerce. In Khoday Distilleries Ltd. v. State of Karnataka, (1995) 1 SCC 574, the Court confirmed that the State may prohibit the manufacture and sale of liquor altogether, may keep the trade as its own monopoly, or may permit it on whatever conditions and at whatever price it thinks fit. A citizen's right under Article 19(1)(g) survives only so far as the State chooses to allow the trade, and even then it is hemmed in by Article 19(6) and by Article 47.
Kerala knows this terrain well, because its own policy was tested and upheld on exactly these grounds. In The Kerala Bar Hotels Association v. State of Kerala, (2015) 16 SCC 421, the Supreme Court upheld the 2014 policy restricting bar licences to five-star hotels, holding that Article 47 places a duty on every State to contain, if not curtail, the consumption of alcohol, and that courts should encourage rather than strike down such measures. The same judgment recorded something this debate keeps forgetting. The Court noted that Kerala had ventured into prohibition in the past and found it unimplementable, and that history has made it abundantly clear that prohibition has not succeeded.
So the legal answer is plain. The tax cut is well within the State's power. A higher rate would be lawful. A lower one is lawful. A complete ban would be lawful. The Constitution does not decide this question for Kerala. It hands the question to Kerala.
Which is why this is a policy question, not a legal one
Once you accept that the State may do almost anything here, the idea that a tax is merely a number falls away. Taxation is one of the oldest instruments a State has for steering behaviour. We tax cigarettes heavily and leave books untaxed, and nobody imagines those are neutral entries in a ledger. To set a soft rate for a sweet, low strength drink is to make a choice about how easy that drink should be to buy. Price is policy. When a mild and pleasant drink is taxed at less than half the rate of hard liquor, the State is lowering the barrier to a first sip, and lowering it most for the young, for whom a cheaper and sweeter and lighter drink is the easiest entry point of all. A government that holds this much legal freedom cannot then claim it has expressed no view. The freedom is exactly what makes the choice its own.
Kerala has already run both experiments
The State does not lack experience to draw on. It has tried the dry road and the open one within a single decade. The 2014 move towards prohibition shut hundreds of bars and was upheld in court, then proved unsustainable and was reversed, after which the number of bars climbed from 28 to more than 880. Through all of it the toddy shop was left alone, because even at its most prohibitionist the State understood the limits of fighting a drink woven into ordinary life. Neither experiment was honest about its aim. One spoke the language of total abstinence while the Beverages Corporation kept its shelves full. The other spoke of careful regulation while licences multiplied.
What a ban actually produces
Those who would answer this row by demanding the category be banned should look at what a ban does once the slogans fade. Bihar has prohibited liquor since 2016. The result is not a sober State but a strained one. The Supreme Court itself has flagged the damage. The then Chief Justice observed that the prohibition law had been framed with a lack of foresight and had clogged the Patna High Court, with a large share of its judges spending each day on liquor bail matters, and lakhs of cases pending in the State's trial courts. Hooch tragedies keep recurring, because people cut off from regulated drink turn to whatever the bootlegger pours, and the arrests fall hardest on the poor, who cannot buy their way around the law. Gujarat, dry since its formation, runs an older version of the same arrangement, with permits for some and a quiet supply for the rest. A ban does not end drinking. It moves the harm into worse hands and sends the bill to the courts.
Article 47 and the duty to be coherent
Article 47 of the Constitution asks the State to work towards prohibiting intoxicating drinks except for medicinal use. It is a directive principle, so no court will enforce it against the government. But it is not nothing. It sets a direction of travel, and it asks the State to be able to explain its liquor decisions in light of that direction. A government that runs its own liquor monopoly, prices a new category of drink to make it attractive, and at the same time runs a publicised anti-drug campaign, owes the public an account of how these fit together. A drive against intoxicants on one page of the State's letterhead and a tax incentive for them on the next is not a policy. It is two decisions that have never been made to face each other.
Where this leaves us
The law does not trap Kerala. It frees it, almost without limit. That freedom is the whole point. Because the courts will not decide this and the Constitution will not decide it, the State must, and it must do so in the open. What is owed is not another walkout or another committee, but a stated liquor policy that says where this category is meant to go, whom it is meant to serve, and how it sits with the State's claim to be reducing harm. A change this consequential deserves to be argued in daylight as policy, not introduced as a tax rate and defended as an accounting entry. Until the State makes that argument, the question the law has left open will stay open, and the only thing that keeps getting more diluted is the answer.
Author is an Advocate & an MCPC and Supreme Court Empanelled Accredited Arbitrator and Mediator. Views are personal.