Karnataka New Excise Coverage: First State To Undertake Alcohol-In-Beverage Liquor Tax System

Karnataka has rolled out a brand new excise coverage introducing the Alcohol-In-Beverage (AIB) tax system, making it the primary state in India to levy excise responsibility based mostly on alcohol content material fairly than pricing classes. The transfer, based mostly on the suggestions made by the Okay.P. Krishnan-led Useful resource Mobilisation Committee, is a part of the State’s broader effort to generate Rs 45,000 crore from the excise sector.

A senior Excise Division official stated the coverage got here into impact on Might 11 by means of the Karnataka Excise (Excise Responsibility and Fees) (2nd Modification) Guidelines, 2026, which have been finalised after public consultations on a draft issued on April 18.

Beforehand, Karnataka adopted a 16-slab taxation system that categorized alcoholic drinks largely in response to value ranges. The revised framework simplifies the construction into eight slabs, narrowing the hole between low- and high-priced liquor classes.

Nonetheless, the brand new mannequin has triggered concern amongst home liquor producers. In keeping with the Karnataka Brewers and Distillers Affiliation (KBDA), the primary 5 slabs, which largely cater to mass-market customers and embrace most state-owned distilleries and contribute practically 70-75% of Karnataka’s excise income, have seen Further Excise Responsibility (AED) enhance by 20-30%, Deccan Herald experiences. In distinction, AED charges for slabs 6 to eight, protecting premium alcoholic drinks produced by multinational firms, have reportedly been decreased by 10-15%.

The KBDA additional argued that whereas giant multinational firms can take in pricing fluctuations throughout broad product portfolios, smaller regional distilleries centered on funds liquor might face declining gross sales volumes and even closure.

The coverage is meant to discourage consumption of high-alcohol-content liquor by taxing stronger drinks extra closely. Nonetheless, trade representatives warn the adjustments could have the alternative impact within the brief time period, as underneath the revised taxation construction, premium and imported manufacturers from firms resembling Diageo, Pernod Ricard, United Spirits, Bacardi, Heineken and Carlsberg might see retail costs fall by 16-20%. In the meantime, funds liquor merchandise, particularly 180 ml tetra packs of whisky, rum, brandy, gin and vodka, are anticipated to grow to be costlier by 20-30%. As an example, a senior KBDA member identified {that a} 180 ml bottle within the lowest slab value Rs 63 final 12 months. After an preliminary enhance to Rs 80, the brand new coverage is anticipated to push the value additional to Rs 105, largely attributable to a 42.8% tax bracket, as per a DH report.

In the meantime, the Worldwide Spirits & Wines Affiliation welcomed the shift, saying it aligns with the precept of “drink higher, no more.” However, the Confederation of Indian Alcoholic Beverage Firms (CIABC) expressed considerations in regards to the coverage’s impression on home producers. Native distillers have additionally alleged that the framework disproportionately favours multinational beer and spirits firms on the expense of homegrown producers.