Karnataka New Excise Policy: Liquor Tax Raised by Up to 20% Based on Alcohol Content; Budget Liquor Prices Set to Soar

Karnataka’s new excise policy has increased alcohol tax by up to 20% based on alcohol content, resulting in a sharp rise in budget alcohol prices. Meanwhile, premium whisky, rum and vodka brands are expected to become cheaper.

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New Excise Policy Brings Mixed Impact on Liquor Prices

The state government has announced a new excise policy that brings contrasting outcomes for consumers. The policy, which came into effect on Monday, is set to significantly alter liquor prices across categories.

While cheaper liquor commonly consumed by the general public is expected to become more expensive, premium and luxury brands are likely to see a reduction in prices. The move is expected to bring a major shift in the state’s liquor market.

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Karnataka Becomes First State to Introduce Alcohol Content-Based Tax

The Karnataka government has scrapped the decades-old ‘bulk litre’-based taxation system and introduced a new method of levying excise duty based on the alcohol content in liquor. With this move, Karnataka has become the first state in the country to implement such a taxation system.

The change has been introduced under the Karnataka Excise (Excise Duties and Fees) (Second Amendment) Rules, 2024, which came into effect on May 11. This marks the fifth revision of excise rates since the Congress government assumed power in 2023.

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Budget Liquor Prices Set to Rise Under New Excise Policy

Under the new excise policy, the government has reduced the number of excise duty slabs from 16 to 8. While this simplification is expected to make the taxation system more streamlined, it is likely to directly affect consumers who purchase budget or low-cost liquor.

The prices of 180 ml (quarter) tetra packs and bottles are expected to witness a significant increase under the revised structure.

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Liquor Tax Increased by 20–30% Under New Excise Policy

According to the Karnataka Brewers and Distillers Association (KBDA), the Additional Excise Duty (AED) on liquor falling under the first five excise slabs has been increased by 20–30% under the revised policy.

These five slabs contribute nearly 70–75% of the state’s total excise revenue, making them a crucial source of income for the government. The hike is expected to significantly impact the budget liquor segment and its consumers.

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Sharp Rise Expected in Prices of Entry-Level Liquor

For instance, a 180 ml bottle of entry-level liquor that was priced at ₹63 last year later increased to ₹80. With the implementation of the new excise tax structure, its price is now expected to rise further to nearly ₹105.

The steep increase is likely to place a significant financial burden on low-income consumers who depend on budget liquor products.

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Premium Liquor Prices Likely to Drop Under New Policy

While the prices of regular liquor are set to increase, premium liquor brands such as whisky, rum, and vodka are expected to become cheaper by 16–20% under the new excise policy.

Products from multinational companies including Diageo, Pernod Ricard, and United Spirits fall under slabs 6 to 8, where excise duty has reportedly been reduced by 10–15%.

The move is expected to benefit affluent consumers as well as multinational liquor companies operating in the premium segment.

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Local Distilleries Criticise New Excise Policy

Local liquor manufacturers have strongly criticised the government’s new excise policy, alleging that it favours multinational companies over domestic producers.

According to industry representatives, small local manufacturers largely depend on the sale of budget liquor products. They fear that the sharp increase in prices could lead to a decline in sales, putting local distilleries at risk of severe losses and possible closure.

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How Will the New Prices Affect Consumers?

Consumers visiting liquor shops in Bengaluru are likely to witness noticeable price hikes under the revised excise policy. The following changes are expected across different pricing slabs:

• First slab: ₹80 to ₹95 
• Second slab: ₹95 to ₹110 
• Third slab: ₹120 to ₹135 
• Fourth slab: ₹150 to ₹170

The revised pricing structure is expected to particularly affect consumers who regularly purchase budget liquor products.

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Middle-Class and Low-Income Consumers Expected to Be Hit Hardest

Overall, the price of a full bottle of liquor is expected to increase by around ₹50 to ₹100 under the new excise policy. The cost could rise even further in bars and restaurants after the addition of service charges and other levies.

The revised pricing structure is likely to come as a major blow to middle-class and low-income consumers, who are expected to bear the brunt of the price hike.