Karnataka’s new excise regime, which came into effect this week, is expected to reshape the State’s alco-bev market by making premium liquor more affordable while increasing prices of low-cost, high-alcohol-content products. Industry executives said the policy could accelerate premiumisation trends and improve ease of doing business for liquor companies operating in the State.
Chief Minister Siddaramaiah unveiled this change during the 2026–27 State Budget in March, proposing an Alcohol-in-Beverage (AIB)–based excise system, market-linked pricing, and fewer duty slabs. This taxation framework is widely regarded globally as the gold standard for alcohol taxation.
According to a report by The Hindu, prices of entry-level liquor have risen by ₹10-20 for 180 ml packs, while premium imported whiskies could become cheaper by as much as ₹700 per 750 ml bottle.
Alok Gupta, Managing Director of Allied Blenders and Distillers, said the changes could support premiumisation in the market.
“Policy changes will fundamentally bring in greater premiumization. In Karnataka, we see a policy where the new excise structure will bring in lower excise duty on the P&A segment and the luxury segment. It’s a bit of a wait-and-see, but it is a positive step,” he said.
In an earlier conversation with businessline, Vivek Gupta, MD and CEO of United Breweries, described the policy direction as a breakthrough for the industry, particularly for beer manufacturers.
“The Karnataka government has come up with a progressive blueprint for the policy. One element is ease of doing business. Some interventions, like digitisation to reduce bureaucracy in simple things like label approval and permits, the work on giving longer shifts, and licenses, are welcomed by the industry,” he said.
Gupta added that the shift toward taxation based on alcohol by volume could make low-alcohol beverages such as beer more affordable and support category growth.
“India should be the biggest beer country. This initiative will shape the category growth. Taxation based on ABV means that low alcohol drinks like beer will be more affordable. While we await the final notification, this is a game-changer for the country. And I hope other states also implement this,” he said.
While the new regime officially came into force on Monday, prices across several liquor brands are still being revised, with the process expected to be completed over the next few days.
Meanwhile, Anant S Iyer, Director General, Confederation of Indian Alcoholic Beverage Companies (CIABC), highlighted that the framework must be carefully calibrated to deliver balanced outcomes across consumer affordability and pricing outcomes, industry sustainability with scalable production, and government revenue with an emphasis on the quality of revenue.
“It is important that the policy is not perceived as favouring any particular category, including beer, as currently proposed. Karnataka’s historical transition from country liquor to regulated, quality IMFL has been a notable public policy success. Affordability for the mass consumer remains paramount, particularly in the lower IMFL slabs (1–5), which account for over 85 per cent of monthly industry volumes. Following the duty increases in May 2025, these segments have already witnessed a decline of around 6 per cent, and the current policy direction risks further deepening this trend in FY26–27,” he observed.
According to Iyer, sustained volume contraction with the proposed AED for 1-5 slabs of spirits will have a cascading impact across the value chain — from distilleries and bottling units to ancillary industries — while affecting the agricultural ecosystem dependent on grains and molasses.
He added that while the rationalisation of duties in Slab 6 and above is a welcome step that supports premiumisation, any structural shift favouring beer may not be revenue accretive. Data across states indicates that IMFL generates 4-6x higher excise revenue per case compared to beer. He urged that the pricing remain aligned with neighbouring States.
(with inputs from The Hindu)
Published on May 15, 2026