Karnataka rolls out new excise policy; budget liquor prices set to rise sharply

Bengaluru: The Government of Karnataka has officially implemented its much-discussed new excise policy from May 11, replacing the decades-old liquor taxation system with a new alcohol-content-based taxation model. With this move, Karnataka has become the first state in India to introduce an excise structure that levies tax based on the percentage of alcohol content in liquor products.

However, the new policy is expected to significantly increase the prices of low-cost liquor consumed by common people, while reducing prices of premium and imported liquor brands.

Under the revised system, the government has reduced the number of excise tax slabs from 16 to eight. According to industry estimates, prices of budget whisky, rum, brandy and vodka are likely to increase by 20 to 30 percent, particularly in the popular 180 ml quarter bottle and tetra pack segments.

The Karnataka Brewers and Distillers Association (KBDA) has expressed concern that the additional excise duty on liquor falling under the first five slabs has been increased substantially. Industry representatives said a quarter bottle that earlier cost around Rs 63 and later rose to Rs 80 after previous revisions could now touch nearly Rs 105 under the new tax regime.

On the other hand, premium and foreign liquor brands are expected to become cheaper. Liquor manufactured by multinational companies such as Diageo, Pernod Ricard and United Spirits is likely to see a price reduction of 16 to 20 percent.

Officials said the additional excise duty on products falling under slabs six to eight has been reduced by nearly 10 to 15 percent, benefiting high-end liquor categories preferred largely by affluent consumers.

The policy has triggered criticism from local manufacturers and industry bodies, who argue that the burden of taxation has disproportionately fallen on budget liquor that contributes nearly 70 to 75 percent of Karnataka’s excise revenue.

The KBDA warned that while multinational companies may absorb market fluctuations, several small and regional liquor manufacturers dependent on low-cost products could face severe financial stress and possible closure due to declining sales.

The policy change has now sparked debate over whether the new taxation structure favours premium liquor companies while placing an additional financial burden on ordinary consumers.