Industry bodies welcome alcohol content–based excise duty in Karnataka

Industry associations representing India’s alcoholic beverage sector have welcomed the Karnataka government’s decision to introduce an alcohol-in-beverage (AIB) based excise duty framework from April 2026. The reform, announced in the 2026–27 state budget by Chief Minister Siddaramaiah, will make the state the first in India to link liquor taxation directly to alcohol content.

The new system is expected to potentially lower prices for certain categories such as beer and wine and will gradually replace the existing uniform excise duty per litre of alcohol over the next three to four years. The government has also proposed measures to boost alcohol linked tourism, including tasting sessions and on-site sales at distilleries and breweries, along with allowing 24-hour operations. Beer labels will also no longer be required to disclose malt and sugar content.

Welcoming the reform, Vinod Giri, DG, Beer Association of India (BAI), described the move as a landmark step for India’s excise policy framework. “The Alcohol-in-Beverage based taxation announced in Karnataka budget is a historic milestone and a beacon for excise policy reforms across India. Linking of taxation with the quantity of alcohol in the product is based on the premise that product to be taxed is alcohol and not water,” he said.

Vinod added that the budget recognises the contribution of the alcobev sector to the socio-economic fabric and introduces steps to modernise controls and improve ease of doing business, while also encouraging tourism initiatives such as beer and whisky trails.

Similarly, Anant S. Iyer of the Confederation of Indian Alcoholic Beverage Companies said rationalisation of excise slabs from 16 to eight would benefit several segments of the industry and provide greater flexibility in pricing within slabs. He noted that while free pricing had existed earlier, it had been restricted in recent years through price comparisons with neighbouring states, a mechanism that now appears likely to be withdrawn.

However, Anant added, “How the mechanism of alcohol-based duty structure is going to evolve is still unclear and we await further details.  Also any policy favouring beer will sooner or later lead to lower sales of IMFL wherein the per case revenue is 4-5 times higher than beer eventually impacting total excise revenue.!”  He also pointed out that some demands of the wine industry appear to have been overlooked, noting that while breweries and distilleries have been granted 24-hour operational permissions, wineries have not been explicitly included.

Reacting to the pricing reforms, Sanjit Padhi of the International Spirits and Wines Association of India said the move towards market-driven pricing aligns the sector with other FMCG industries. “At the outset, ISWAI Market-determined pricing, similar to other FMCG sectors, allows market conditions to define prices in a way that benefits consumers, government and suppliers alike.”

Sanjit  added that while it is premature to comment on the AIB-based framework until the final tax structure is released, the reduction of slabs from 16 to eight is a positive step that will provide brands greater flexibility in pricing. He noted that the reforms could influence investment, portfolio expansion and pricing strategies, potentially encouraging premiumisation in a market where nearly 93 percent of consumption currently lies in the lower price segments.