Bangluru: Chief Minister Siddaramaiah on Friday unveiled sweeping reforms to Karnataka’s liquor policy in the 2026–27 Budget, proposing an Alcohol-in-Beverage (AIB)–based excise system, market-linked pricing, and fewer duty slabs. However, industry experts expressed concerns that the changes could make alcohol more expensive in key mass-market segments.
During the Budget speech, he announced that the State will introduce an AIB–based excise duty structure from April 2026, a taxation framework widely regarded globally as the gold standard for alcohol taxation.
“There will be a uniform level of Excise Duty (ED), whereas Additional Excise Duty (AED) will be levied within a defined range based on an ex-factory price slab basis. We will ensure the price changes are gradual and not disruptive,” the CM said.
Product placement
The system of levying uniform ED based on the alcohol content per litre will be introduced gradually over the next 3-4 years. Alongside, under the new policy, the government-administered price fixation will be deregulated. Product placement within slabs will be left to the producers based on market considerations. Pricing slabs will also be reduced to 8 slabs from 16.
He announced that the Resource Mobilisation Committee (RMC) constituted by the Government will soon submit its draft report outlining the principles for a modern excise taxation and alcohol regulatory framework.
Other proposals include alcohol tourism by allowing distilleries and breweries to host tastings and sell products to visiting tourists. Manufacturing licences will be auto-renewed, while label approvals, CL-5, and RVB licences will be auto-generated online upon self-declaration and fee payment, with deemed approval and no manual intervention. Distilleries and breweries will also be allowed 24-hour operations and dispatch, and the requirement to display malt and sugar content on beer labels will be removed.
Anant S Iyer, Director General, Confederation of Indian Alcoholic Beverage Companies (CIABC), said the rationalisation in the excise slabs will benefit certain segments of the industry. He welcomed the ease of doing business and steps related to the modernisation of the sector.
However, if the rationalisation is accompanied by an increase in duty in slabs 1 to 4, which constitutes 85-90 per cent of Spirits sales in Karnataka and is the primary driver for the excise revenue collection, there will be a further drop in sales in these slabs, adversely impacting revenue in the medium term. Besides, due to an AED increase last year, these slabs, which cater to the masses, degrew 6 per cent year to date.
“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,” Iyer said, highlighting that the state government has failed to acknowledge the demands and suggestions of the wine industry, for which separate representations were submitted.
On the other hand, Sanjit Padhi, the CEO of International Spirits and Wines Association of India (ISWAI), added that market-determined pricing, similar to other FMCG sectors, allows market conditions to define prices in a way that benefits consumers, government, and suppliers alike.
“While it is premature to comment on the AIB-based excise framework as we await the final tax structure, the rationalisation of slabs from 16 to 8 will provide brands greater headroom to set appropriate pricing. These reforms can influence investment, portfolio expansion, and pricing strategies for spirits makers. Investment is driven by market size, profitability, ease of doing business, and policy stability. With nearly 93 per cent of the market concentrated at the lower end, the right tax structure could accelerate premiumisation and encourage consumers to move up the price ladder,” he said.
Policy shift
The policy shift to move away from State-controlled alcohol pricing is significant, noted Maj Gen (Dr) Rajesh Chopra AVSM (retd.) Director General, Indian Malt Whisky Association (IMWA).
“For years, rigid price controls and complex slab structures limited producers’ ability to align pricing with quality, innovation, and consumer demand. Moving toward a model that links taxation more closely to alcohol strength, while allowing producers greater pricing flexibility, is a step toward a more rational and globally aligned regulatory framework,” he said.
These reforms signal a broader shift toward recognising quality-driven categories like Indian single malts and premium craft spirits. A transparent and simplified excise structure can encourage responsible growth, foster innovation among domestic distillers, and create a more level playing field for premium Indian spirits, he added.
Stormy
Stormy Chandigarh: The budget session of the Punjab assembly got off to a stormy start on Friday as the main opposition Congress slammed the ruling Aam Aadmi Party (AAP) government over the issue of deteriorating law and order and recent killings in the state, during Governor Gulab Chand Kataria’s inaugural address and subsequently staged walkout. Start To Punjab Assembly Budget Session; Congress Slams AAP Govt Over Law, Order Issue During Guv Address, Stages Walk-out
Start To Punjab Assembly Budget Session; Congress Slams AAP Govt Over Law, Order Issue During Guv Address, Stages Walk-out
