Bengaluru: Liquor prices in Karnataka may soon see a significant increase as the state government moves to overhaul its excise taxation system. A draft notification proposes a shift to an ‘Alcohol-in-Beverage (AIB)’ policy, under which taxes will be calculated based on the actual alcohol content in each product rather than bottle size.
If implemented, Karnataka would become the first state in India to adopt such a framework, marking a major shift in how alcoholic beverages are taxed.
Shift from quantity to alcohol content
Currently, excise duty is levied based on the quantity or volume of liquor sold. Under the proposed AIB policy, the tax will instead be linked to the percentage of alcohol present in each bottle.
This means beverages with higher alcohol concentration will attract higher taxes, regardless of their size or price category. As a result, commonly consumed Indian-made liquors such as whisky, rum, brandy, and gin could see price hikes of up to 20%.
Officials say the move is aimed at rationalising the tax structure and aligning it more closely with alcohol content, which is considered a more scientific basis for taxation.
Impact on consumers
The proposed change is expected to disproportionately affect lower-priced liquor segments. These categories, typically consumed by lower and middle-income groups, fall within the first four MRP slabs.
At present, these slabs contribute nearly 80% of the state’s excise revenue and have an average alcohol content of about 42.8%. With taxation shifting to alcohol content, prices in these segments are likely to rise sharply.
For instance, a 180 ml bottle that currently costs around Rs 95—after a previous increase from Rs 80—could see its price rise further to between Rs 105 and Rs 110 under the new system.
This potential increase has raised concerns about affordability and the financial burden on regular consumers.
Industry raises concerns
The proposal has drawn criticism from industry stakeholders. Arun Kumar Parasa, president of the Karnataka Brewers and Distillers Association, expressed apprehension over the impact on the market.
He noted that lower-priced segments cater to ordinary consumers and any steep price increase could disrupt demand. “We will discuss this with Chief Minister Siddaramaiah. We are hopeful that the government will consider our suggestions before issuing the final notification,” he said.
Legal framework and next steps
The government plans to introduce the changes under Section 71 of the Karnataka Excise Act, 1965. The draft notification has been released for public consultation, allowing stakeholders to provide feedback before the policy is finalised.
Officials indicated that a final decision is expected in the coming days after reviewing responses from the public and industry representatives.
Wider implications
If implemented, the AIB policy could significantly reshape Karnataka’s liquor pricing structure. While it may lead to increased revenue for the state, it also raises questions about its impact on consumption patterns and affordability.
Experts believe the move could encourage a shift towards lower-alcohol beverages, but its immediate effect is likely to be felt through higher retail prices across popular liquor categories.
Conclusion
Karnataka’s proposed transition to an alcohol-content-based taxation system marks a bold and potentially transformative step in excise policy. As the government weighs feedback from stakeholders, the final decision will determine how the balance is struck between revenue goals and consumer impact.