Looking for expert help with Income tax and GST for wine and liquor shop owners India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- Liquor for human consumption is outside GST (Section 9(1), CGST Act). Soda and packaged water are 5%, sweetened or flavoured soft drinks are 40% (Notification 9/2025-Central Tax (Rate)).
- Liquor sales count in your aggregate turnover. Sell even a little soda, and you need GST registration once total sales cross Rs 20 lakh in Telangana.
- The composition scheme has been open to liquor shops since 1 October 2023, at 1% of taxable sales only, if last year's total turnover was up to Rs 1.5 crore.
- TCS on your liquor purchases doubled from 1% to 2% from 1 April 2026 (Section 394, Income-tax Act 2025). Claim it in your ITR.
- Most wine shops are cash-heavy, so the Section 44AD limit is Rs 2 crore and the audit limit is Rs 1 crore.
Is GST applicable on liquor shops in India? No GST is charged on alcoholic liquor for human consumption, because Section 9(1) of the CGST Act 2017 excludes it from the levy. A wine shop still charges GST on soda, packaged water, soft drinks and snacks, and liquor sales still count toward the registration and composition turnover limits.
Wine shop owners often assume GST has nothing to do with them. That's true for the bottles, but not for the soda crates by the door. Meanwhile, the income tax side changed this year: the tax your supplier collects on every liquor invoice doubled from 1 April 2026. This guide is for licensed retail liquor shops and their accountants. It covers GST under the CGST Act 2017 and income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, plus the changes that apply from 1 April 2026 under the Income-tax Act 2025.
What is taxed under GST in a wine shop?
Only the non-liquor items. Section 9(1) of the CGST Act levies tax on all intra-State supplies of goods or services "except on the supply of alcoholic liquor for human consumption". Liquor stays with the State's excise and VAT laws, which this guide doesn't cover.
Comparison
GST on Items a Wine Shop Sells (from 22 September 2025)
| Item (HSN) | GST | Source |
|---|---|---|
| Beer, wine, whisky, rum and other alcoholic liquor for human consumption | Outside GST | Section 9(1), CGST Act 2017 |
| Packaged water and plain soda, without sugar or flavour (2201) | 5% | 9/2025-CT(R), Schedule I, S. No. 146 |
| Ice (2201 90 10) | 5% | 9/2025-CT(R), Schedule I, S. No. 147 |
| Aerated drinks with added sugar or flavour (2202 10) | 40% | 9/2025-CT(R), Schedule III, S. No. 1 |
| Carbonated fruit drinks, caffeinated beverages | 40% | 9/2025-CT(R), Schedule III, S. No. 3 and 4 |
| Snacks, disposable glasses and other goods | Rate notified for that item | Check the HSN in Notification 9/2025-CT(R) |
Source: CGST Act 2017, Section 9(1); Notification 9/2025-Central Tax (Rate), dated 17 September 2025, in force from 22 September 2025
The split between 5% and 40% matters. Plain soda (aerated water without sugar or flavour) sits in heading 2201 at 5%. A cola or lemon soda with added sugar or flavour moves to 2202 10 at 40%, that is 20% CGST plus 20% SGST.
Do you need GST registration?
It depends on whether you sell anything besides liquor.
Liquor only. Section 23(1)(a) of the CGST Act says a person "engaged exclusively in the business of supplying goods or services or both that are not liable to tax" doesn't have to register.
Liquor plus anything taxable. This is where most shops trip. Section 2(78) calls liquor a "non-taxable supply". Section 2(47) says exempt supply "includes non-taxable supply". And Section 2(6) builds aggregate turnover from taxable supplies and exempt supplies. So your liquor sales count toward the limit even though no GST is due on them.
Say your Telangana shop sells Rs 1.8 crore of liquor and Rs 3 lakh of soda and water in a year. Your aggregate turnover is Rs 1.83 crore. You make taxable supplies, and you're well above Rs 20 lakh, so Section 22(1) requires registration.
Which limit applies? Section 22(1) sets Rs 20 lakh. Notification 10/2019-Central Tax raised it to Rs 40 lakh for suppliers of goods only, but it excludes intra-State suppliers in Telangana and nine other States and UTs. In Telangana, use Rs 20 lakh. Our GST registration service handles the application.
Composition or regular GST: which costs less?
Composition is now allowed. Until 30 September 2023, Section 10(2)(b) barred anyone supplying goods "not leviable to tax" from composition. The Finance Act 2023 (Section 137) deleted the words "goods or" from that clause with effect from 1 October 2023 (Notification 28/2023-Central Tax). Only suppliers of non-taxable services remain barred.
The limit includes liquor. You qualify if aggregate turnover in the previous financial year was up to Rs 1.5 crore (Notification 14/2019-Central Tax), and liquor counts toward that figure.
The tax excludes liquor. Rule 7 of the CGST Rules, Table S. No. 3, charges a trader 0.5% CGST "of the turnover of taxable supplies of goods and services in the State". Add the same under the State GST law and you pay 1% of non-liquor sales only.
Example: last year your shop sold Rs 1.25 crore of liquor and Rs 5 lakh of soda, water and snacks, a total of Rs 1.30 crore. You can opt for composition. If you sell Rs 5 lakh of taxable goods again this year, composition tax is 1% of Rs 5,00,000, or Rs 5,000. You can't charge GST to customers or claim input tax credit (Section 10(4)), and you file CMP-08 quarterly and GSTR-4 annually. Our composition scheme guide explains the conditions.
Regular scheme: expect to lose most of your credit. A shop above Rs 1.5 crore files GSTR-1 and GSTR-3B, charges 5% or 40% on taxable items, and claims input tax credit. Here's the catch. Section 17(2) blocks credit used for exempt supplies, and liquor counts as exempt. Rule 42 reverses common credit in the ratio of exempt turnover to total turnover (D1 = E/F x C2).
One detail changes the numbers. The Explanation to Rule 42(1)(i) leaves out State excise duty and VAT on liquor (entries 51 and 54 of List II of the Constitution's Seventh Schedule) from both E and F. So take liquor sales net of those levies.
Suppose that in one month your total turnover, net of excise duty and VAT, is Rs 20,00,000, of which Rs 19,40,000 is liquor. GST on shop rent from a registered landlord, AC servicing and billing software comes to Rs 18,000 of common credit. The reversal is 19.4/20 x Rs 18,000 = Rs 17,460. You keep Rs 540. Our Rule 42 guide shows the full calculation.
Step-by-Step Guide
Monthly GST Routine for a Regular-Scheme Wine Shop
Split sales into three buckets
Liquor (non-taxable), 5% items such as plain soda and packaged water, and 40% items such as sweetened soft drinks.
Report liquor as non-GST supply
Liquor sales go into GSTR-1 and GSTR-3B as non-GST outward supplies, not as taxable sales.
Match input tax credit
Claim ITC on soda and water stock bought from registered suppliers, matched against your GSTR-2B.
Reverse common credit
For rent, repairs and software used for all sales, reverse the share that matches liquor turnover under Rule 42.
File GSTR-1 and GSTR-3B
Report sales in GSTR-1 and pay the net tax through GSTR-3B by the due date.
Source: CGST Act 2017, Sections 2(47), 9, 17(2), 22, 23; Rule 42, CGST Rules 2017
TCS on liquor purchases: 1% to 2% from 1 April 2026
When the State beverages corporation, a depot or a licensed wholesaler sells you liquor, it must collect tax at source (TCS) from you on the amount it bills.
- Up to 31 March 2026: 1% under Section 206C(1), Table S. No. (i), of the Income-tax Act 1961.
- From 1 April 2026: 2% under Section 394(1), Table S. No. 1, of the Income-tax Act 2025. The Finance Act 2026 substituted "2%" for "1%".
- No PAN with the supplier: the higher of twice the rate or 5%, so 5% in both years (Section 206CC of the 1961 Act; Section 397(2) of the 2025 Act).
Which suppliers collect? The "seller" covers the Central or a State Government, a State corporation or authority, any company, firm or co-operative society, and an individual or HUF whose business turnover crossed Rs 1 crore in the previous year (Section 206C, Explanation (c); Section 402(33) of the 2025 Act).
You don't collect TCS from your own customers. A person buying in a retail sale for personal consumption isn't a "buyer" for this TCS (Section 206C, Explanation (aa)(i)(B); Section 402(6), Table S. No. 2 of the 2025 Act). A club is excluded too.
The TCS is your money. Section 206C(4) treats TCS paid to the government as tax paid on your behalf. It shows up in Form 26AS and your AIS, and you claim it in the ITR for that year.
Example (proprietor, new tax regime, FY 2026-27, no other income): you buy Rs 2,40,00,000 of liquor stock in the year. Your supplier collects 2%, or Rs 4,80,000. Your audited net profit is Rs 15,00,000.
- Tax on Rs 15 lakh: Rs 4-8 lakh at 5% = Rs 20,000; Rs 8-12 lakh at 10% = Rs 40,000; Rs 12-15 lakh at 15% = Rs 45,000. Total Rs 1,05,000.
- No rebate, because income is above Rs 12 lakh. Add 4% Health and Education Cess of Rs 4,200. Tax payable: Rs 1,09,200.
- TCS credit of Rs 4,80,000 exceeds that by Rs 3,70,800, which comes back as a refund once you file.
- The same purchases in FY 2025-26 at 1% would have meant Rs 2,40,000 of TCS.
At these volumes, the cash locked up in TCS can be bigger than your tax bill. File early, and check that every supplier invoice appears in Form 26AS under your PAN. Our TCS guide covers the full rate table.
Tax Rate Chart
New Tax Regime Slabs (FY 2025-26 and Tax Year 2026-27)
Up to Rs 4 lakh
Rs 4-8 lakh
Rs 8-12 lakh
Rs 12-16 lakh
Rs 16-20 lakh
Rs 20-24 lakh
Above Rs 24 lakh
Source: Section 115BAC(1A)(iii), Income-tax Act 1961 (as amended by Finance Act 2025); Section 202(1), Income-tax Act 2025
Section 44AD, books and tax audit
A resident individual, HUF or partnership firm (not an LLP) can use Section 44AD if turnover is up to Rs 2 crore. The limit goes up to Rs 3 crore only where cash receipts are within 5% of turnover, and most wine shops take far more cash than that. Deemed profit is 8% of cash turnover and 6% of turnover received by bank, UPI or account payee cheque by the ITR due date.
Two things to watch:
- 8% of cash sales may exceed your real margin. You can declare lower actual profit, but if you used 44AD in any of the previous five years, Section 44AD(4) shuts you out of 44AD for the next five years. Section 44AD(5) then requires books and an audit whenever your income is above the basic exemption limit.
- Most wine shops cross the audit line. Outside 44AD, Section 44AB(a) requires a tax audit once turnover exceeds Rs 1 crore. The higher Rs 10 crore limit applies only when cash receipts and cash payments are each within 5%, which a cash-heavy counter won't meet.
From FY 2026-27, presumptive tax moves to Section 58 (Table, S. No. 1) and the audit limits to Section 63 of the Income-tax Act 2025, with the same rupee figures. See our Section 44AD guide for the full rules.
Common mistakes wine shop owners make
- Leaving liquor out of aggregate turnover. It's non-taxable, but it still counts toward the Rs 20 lakh registration limit and the Rs 1.5 crore composition limit.
- Charging 5% on flavoured soda. Only unsweetened, unflavoured aerated water is in heading 2201 at 5%. Lemon or cola sodas with added sugar or flavour are 40%.
- Claiming full credit on rent and repairs. Under Rule 42, nearly all common credit is reversed when liquor is most of your turnover.
- Budgeting for 1% TCS in FY 2026-27. The rate is 2% from 1 April 2026, and 5% if your PAN isn't with the supplier.
- Not claiming the TCS. Unclaimed TCS is your tax paid and lost. Match Form 26AS with supplier invoices before you file.
How Tax Garden helps wine shop owners
We check whether your soda and water sales trigger registration, compare composition with the regular scheme on your actual figures, and file GSTR-1 and GSTR-3B with the Rule 42 reversal through our GST return filing service. At year end, our ITR filing service reconciles every TCS entry against supplier invoices and claims the refund. See pricing for plans.
