Liquor industry bodies flag K’taka Alcohol-in-Beverage excise plan’s uneven impact across categories

KArnataka’s proposed dislodge to an Alcohol-in-Beverage (AIB) taxation scheme has triggered competing responses from manufacture bodies, with a spacious consensus rising that while the reform marks a structural shift, its impact across liquor categories could be uneven.The Confederation of Indian Alcoholic Beverage Companies (CIABC) cautioned that the framework risks disproportionately affecting high-volume, lower-priced Indian Made Foreign Liquor (IMFL) segments if not carefully balanced. The Confederation’s director general Anant S Iyer said, “It is equally important that the policy is not perceived as favouring any particular category, including beer, as currently proposed.”He described the AIB system as a reform-oriented step but stressed the need for balance: “The introduction of the Alcohol-in-Beverage (AIB) mechanism is a progressive step and reflects the Government’s intent to reform the sector. However, the framework must be carefully calibrated to deliver balanced outcomes across three critical pillars — consumer affordability and pricing outcomes, industry sustainability with scalable production, and government revenue with an emphasis on the quality of revenue.”These concerns centre on the lower IMFL slabs, which account for more than 85% of monthly volumes and a significant share of state revenue. “Affordability for the mass consumer remains paramount, particularly in the lower IMFL slabs (1–5),” Iyer said, adding, “Following the duty increases in May 2025, these segments have already witnessed a degrowth of approximately 6%, and the current policy direction risks further deepening this trend in FY26–27.”He warned that the proposed structure could have wider consequences: “Sustained volume contraction with the proposed AED (additional excise duty) for 1-5 slabs of spirits will have a cascading impact across the value chain — from distilleries and bottling units to ancillary industries — while also affecting the agricultural ecosystem dependent on grains and molasses.”While CIABC flagged risks to the spirits segment, the Brewers Association of India strongly backed the shift, framing it as a structural correction. Brewers Association of India director general Vinod Giri said, “By announcing AIB-based taxation mechanism, Karnataka has become the first state in the country to explicitly link revenue maximisation goal of the State with desired public health outcomes.”The brewers’ body said the approach aligns with global practices and recommendations of the World Health Organization, and pointed to complementary reforms such as price deregulation, 24-hour operations and simplified licensing.At the same time, the Karnataka Brewers and Distillers Association highlighted concerns that cut across segments. Karnataka Brewers and Distillers Association president Arun Kumar Parasa said the proposed changes could lead to higher retail prices, particularly affecting commonly consumed categories, and indicated that the issue would be taken up with the chief minister.Officials indicated that the first four price slabs — which largely cater to lower-income consumers — could see the sharpest impact under the new system. These categories account for nearly 80% of excise revenue. Prices of a standard 180 ml bottle, which rose from ₹80 to ₹95 last year, could increase further to around ₹105–110 if the proposal is implemented.Under the draft Karnataka Excise (Excise Duties and Fees) (Amendment) Rules, 2026, taxation would shift from a price-linked slab system to one based on alcohol content per litre. Spirits such as whisky, rum, gin and brandy would attract a uniform duty of ₹1,000 per litre of pure alcohol, with a similar rate applied to beer.CIABC questioned whether such a shift would deliver the intended revenue outcomes if it altered consumption patterns across categories. “Data across states consistently indicates that IMFL generates 4 to 6 times higher excise revenue per case compared to beer,” Iyer said, adding that “the perception that beer consumption has a significantly lower impact on health is often overstated, as higher consumption volumes often offset the lower alcohol strength.”He also flagged the risk of market distortions across states: “It is also important to ensure that pricing remains aligned with neighbouring states. Any emerging price distortions — particularly in beer, despite higher ex-brewery costs in Karnataka — could lead to market imbalances.”The state government had invited objections and suggestions within seven days of notifying the draft rules. As the consultation process unfolds, industry responses suggest that the central challenge will be balancing public health and revenue goals without disproportionately affecting specific liquor categories that anchor consumption and tax collections.