The Telangana High Court has stayed the implementation of the state’s new special privilege fee on bars for four weeks, giving temporary relief to more than 100 licence holders challenging the levy’s legality and timing. The fee, imposed through a government order issued by the prohibition and excise department, ranges from 8% to 16% on liquor supplied to Form 2B bar licence holders.
Justice Namavarapu Rajeshwar Rao passed the interim order on October 30 while hearing two writ petitions filed by bar owners from the erstwhile Warangal district. The court has listed the matter for further hearing on November 27, after the four-week stay period expires.
The petitions challenge the government order issued on October 19 and argue that the state does not have statutory authority under the Excise Act and related rules to impose the new charge. Senior counsel P Vishnuvardhan Reddy, appearing for the petitioners, told the court that the levy was contrary to earlier judgments of the Telangana High Court and the Supreme Court on similar issues.
The petitioners also relied on Article 265 of the Constitution, which states that no tax can be levied or collected except by authority of law. They argued that the new privilege fee was introduced during an ongoing licence period and imposed an additional financial obligation over and above the existing turnover tax.
According to the petitions, the bar licences for the period from October 2026 to September 2027 had already been renewed. Licence holders had paid annual bar excise tax ranging between ₹42 lakh and ₹55 lakh and had submitted the required bank guarantees. The petitioners said the proposed fee had been under consideration when the licences were renewed, but that no prior notice, draft proposal or transition period had been provided before the levy was introduced.
The bar owners further argued that the additional charge could place a significant financial burden on their businesses and potentially affect the viability of operations. They also said that the levy could expose them to the risk of forfeiting deposits if they were unable to meet the revised financial requirements.
The prohibition and excise department opposed the petitions. Government pleader A Jagan argued that the licence holders had submitted undertakings agreeing to pay any fees that the government might impose in the future. On that basis, he contended that the petitioners could not later challenge the government order and maintained that the levy was legally sustainable.
After hearing both sides, the court ordered an interim stay on implementation of the government order for four weeks. The legal challenge, including the questions over statutory authority, the constitutional requirement for taxation and the levy’s introduction during the licence period, will be considered further at the next hearing on November 27.
