Karnataka’s New Liquor Tax Boosts Revenue, but Industry Flags Affordability Concerns

Bengaluru, Oct 9 : Karnataka’s new alcohol-content-based excise duty system has boosted state revenue, but sluggish growth in Indian-Made Liquor (IML) sales and a sharp surge in beer volumes have raised concerns over the policy’s long-term impact on consumers and the liquor industry.

Introduced on May 11, 2026, the Alcohol-in-Beverage (AIB)-based taxation system links excise duty to the amount of alcohol in a beverage. The policy also reduced the number of excise duty slabs from 16 to eight, giving manufacturers greater flexibility in fixing prices.

According to July-September 2026 sales figures cited by the Confederation of Indian Alcoholic Beverage Companies (CIABC), beer sales rose 49.69 per cent to 126.68 lakh cases, while IML sales grew by just 1.52 per cent to 171.69 lakh cases.

Despite the modest growth in IML volumes, revenue from the segment increased 13.36 per cent to Rs 9,033.21 crore during the quarter. Beer revenue rose 18.52 per cent to Rs 1,463.07 crore over the same period.

The state generated an additional excise revenue of Rs 1,291.94 crore during the quarter, with IML contributing approximately 82 per cent and beer accounting for around 18 per cent, according to CIABC’s analysis.

The industry body has urged the state government to reconsider the policy, arguing that higher tax costs on affordable liquor products could increase the financial burden on consumers and weaken demand in the mass-market segment.

The revised tax structure has affected beverage categories differently. While some entry-level liquor products have faced higher costs, certain premium spirits and beer brands may become cheaper under the new system.

CIABC has also questioned the assumption that beer is inherently less harmful than spirits, emphasising that the health risks associated with alcohol depend on overall consumption and drinking patterns.

However, the available figures do not establish that the new taxation system alone is responsible for the changes in sales volumes. Further monitoring of prices, consumption patterns and revenue trends will be necessary to assess the policy’s long-term impact.

The Karnataka government now faces the challenge of balancing revenue generation with consumer affordability, industry stability and public health objectives as the effects of the revised excise structure continue to unfold.