Industry bodies give mixed response to overhaul of liquor tax framework in Karnataka

E-PaperSubscribeSubscribeEnjoy unlimited accessSubscribe Now! Get features like Industry groups have offered a mixed response to Karnataka’s proposed overhaul of its liquor taxation framework, with brewers welcoming the shift to an alcohol-based system while distillers cautioned that it could raise prices for mass-market consumers. Industry bodies give mixed response to overhaul of liquor tax framework in KarnatakaThe Brewers Association of India described the move to an Alcohol-in-Beverage (AIB) framework as a “watershed moment” for the sector, saying it aligns taxation with both revenue objectives and public health goals. “By announcing AIB-based taxation mechanism, Karnataka has become the first state in the country to explicitly link revenue maximisation goal of the State with desired public health outcomes,” said Vinod Giri, director general of the Brewers Association of India. The association said the approach reflects global best practices and is in line with World Health Organization recommendations. It also pointed to broader reforms in the draft rules, including price deregulation, 24-hour operations for breweries and distilleries, online approvals, automatic licence renewals, and provisions supporting brewery-linked tourism. At the same time, the Karnataka Brewers and Distillers Association raised concerns about the potential impact on affordability. Arun Kumar Parasa, president of the Karnataka Brewers and Distillers Association, said the proposed changes could lead to higher retail prices, particularly affecting commonly consumed liquor categories. He added that the association plans to take up the issue with the chief minister and expects the government to consider industry feedback before finalising the policy. Reflecting investor sentiment, shares of liquor companies including Tilaknagar Industries, Radico Khaitan and United Breweries rose by up to 3% on Monday following the release of the draft proposal. Currently, liquor pricing in the state follows a slab-based taxation system linked to maximum retail price. Officials indicated that the first four slabs, which largely serve lower-income consumers, could see the most significant impact under the new model. These categories account for nearly 80% of the state’s excise revenue and typically contain an average alcohol content of 42.8%. Prices of a standard 180 ml bottle, which rose from ₹80 to ₹95 last year, could increase further to around ₹105– ₹110 if the new regime is implemented, according to officials. The proposed changes form part of the Karnataka Excise (Excise Duties and Fees) (Amendment) Rules, 2026, issued under Section 71 of the Karnataka Excise Act, 1965 and published in the state gazette on April 18. At the centre of the proposal is the introduction of the AIB metric, defined as: “(a) ‘Alcohol-in-Beverage (AIB)’ means the alcohol content/volume per litre of liquor such as Brandy, Whisky, Gin, Rum, Beer, Wine, Fruit Wine, Fortified Wine, Low Alcoholic Beverage and such other liquors consisting of or containing alcohol”. Under the proposed framework, spirits such as brandy, whisky, gin and rum would attract a uniform duty of ₹1,000 per litre of pure alcohol when supplied to distributors, while bottled beer would be taxed at the same rate when sold or imported into the state. The draft also introduces a revised Additional Excise Duty structure based on price slabs, alongside a separate three-tier system for bottled beer. Institutional buyers such as military and paramilitary canteens would continue to be taxed based on volume, with rates linked to alcohol strength. The government has invited objections and suggestions within seven days of the notification, after which the rules will be considered for finalisation. If adopted, Karnataka would become the first state in India to implement an AIB-based taxation system, a model used in several Western countries.