With an ambitious target of ₹45,000 crore from the excise sector, Karnataka has become the first state in the country to implement the Alcohol-In-Beverage (AIB) tax system, which levies excise duty based on the alcohol content. The policy, implemented from Monday, has drawn mixed reactions across the industry.
The International Spirits & Wines Association has appreciated the move for aligning with its core idea: drink better, not more. However, the Confederation of Indian Alcoholic Beverage Companies (CIABC) has raised concerns over its impact on domestic players.
Karnataka used to rely on a 16-slab taxation system that taxed different types of alcohol according to price-based slabs. The method has been modified into 8 price slabs, reducing the divide between vastly different-priced alcohol.
The new slab rationalisation could bring together a foreign whiskey and a domestic brandy under the same tax slab, depending on their alcohol content and bottle prices. This is expected to particularly benefit the premium beer industry, given fewer tax slabs and lower alcohol content.
According to a report by The New Indian Express, this results in premium alcohol brands being expected to see a price reduction of 16-20 per cent, while Indian Made Liquor is expected to become 20-25 per cent costlier.
At a time when Multi-National Companies (MNCs) are aggressively expanding into premium segments, aided by cost-cutting driven by rising packaging costs from the US-Iran war, this could further boost premium liquor sales. However, Indian-made liquor may face adverse effects.
With volume growth of 9 per cent and value growth of 12 per cent in 2025, premium alcohol is already being rapidly adopted by Indian consumers. Under this context, causing this change in taxation can severely undermine domestic players.
