Industry groups have given mixed reactions to Karnataka’s proposed overhaul of its liquor taxation framework, with brewers welcoming the shift to an alcohol-based system while distillers warn it could raise prices for mass market consumers.
The Association of Indian Brewers has described the move to the Alcohol in Beverages (AIB) framework as a “watershed moment” for the sector, saying it links taxation with revenue targets and public health goals.
“By announcing the AIB-based tax mechanism, Karnataka has become the first state in the country to explicitly link the goal of state revenue maximization with desired public health outcomes,” said Vinod Giri, Director General, All India Brewers Association.
The association said that this approach reflects global best practices and is in line with the recommendations of the World Health Organization. He also pointed to broader reforms in the draft rules, including price liberalization, 24-hour operations for breweries and distilleries, online approvals, automatic license renewals, and provisions supporting brewery-related tourism.
Meanwhile, the Karnataka Brewers and Distillers Association has raised concerns about the potential impact on affordability. Arun Kumar Parasa, president of the Karnataka Brewers and Distillers Association, said the proposed changes could lead to higher retail prices, particularly affecting commonly consumed categories of alcoholic beverages.
He added that the association plans to discuss the issue with the Prime Minister and expects the government to take into account industry comments before finalizing the policy.
Reflecting investor sentiment, shares of liquor companies including Tilaknagar Industries, Radico Khaitan and United Breweries rose as much as 3% on Monday after the draft proposal was released.
Currently, the pricing of alcoholic beverages in the state follows a slab-based tax system linked to a maximum retail price. Officials noted that the top four segments, which largely serve low-income consumers, could see the most significant impact under the new model. These categories represent approximately 80% of the state’s tax revenue and typically have an average alcohol content of 42.8%.
Prices for the standard 180ml bottle have increased from $80 l $95 last year, it can increase to approx $105– $110 if the new system is implemented, according to officials.
The proposed changes form part of the Karnataka Excise (Excise Duties and Charges) (Amendment) Rules, 2026, promulgated under Section 71 of the Karnataka Excise Act, 1965 and published in the State Gazette on April 18.
At the heart of the proposal is the introduction of the AIB measure, which is defined as follows: “(a) ‘Alcohol in beverages (AIB)’ means the alcohol content/volume per liter of alcoholic beverages such as brandy, whisky, gin, rum, beer, wine, fruit wines, fortified wines, low alcohol drinks and other alcoholic beverages consisting of or containing alcohol.”
Under the proposed framework, spirits such as brandy, whisky, gin and rum would attract uniform duty $1,000 per liter of pure alcohol when supplied to distributors, while bottled beer will be taxed at the same rate when sold or imported into the state.
The draft also introduces a revised additional tariff structure based on price brackets, along with a separate three-tier system for bottled beer. Institutional buyers, such as military and paramilitary canteens, will continue to be taxed based on volume, with rates linked to the strength of the alcohol.
The government has called for objections and suggestions to be submitted within seven days of notification, after which the rules will be considered for finalization.
If the system is adopted, Karnataka will become the first state in India to implement an AIB-based tax system, a model used in many Western countries.
