BAI terms Karnataka Budget transformative for beverages sector

Brewers Association of India (BAI) on Friday welcomed the Karnataka State Budget 2026–27, presented as a watershed moment for excise policy reformsin India. The Budget announced seminal structural reforms to alcohol taxation and regulation. BAI said that the most consequential announcement for alcobev industry is the explicit Alcohol-in-Beverage (AIB)based excise duty structure from April 2026, which applies taxation based on the actual amount of alcohol in the product.

The Budget states that AIB-based taxation targets the alcohol content, which is the primary source of negative externalities, which is a fundamental change in State philosophy to moveaway from revenue maximisation obsession to a robust optimisation of revenue maximisation and public health outcomes. The principle of taxing alcohol in the beverage and not the water is the WHO-recommended gold standard for alcohol taxation and is widely followed in most progressive and developed countries in the world.

“The Alcohol-in-Beverage-based taxation announced in the Karnataka budget is a historic milestone and a beacon for excise policy reforms across India. Linking of taxation with the quantity of alcohol in the product is based on the premise that the product to be taxed is alcohol and not water.

It is widely followed all over the World now and is encouraged by health bodies such as the WHO. By adopting the need to optimise revenue and public health goals of moderation, the Government has reinforced the State’s image as a progressive reformist leader in country,” said Vinod Giri, Director General, Brewers Association of India.

The Budget also recognises the social role played by alcohol in the hospitality sector and seeks to allow economic opportunities related to brewery and distillery tourism, something that countries such as Scotland, France, and European nations do so well for spirits, wines and beer.

The budget also accepts alcobev sector as the integral part of the industrial ecosystem and has several steps to improve Ease of Doing Business such as full deregulation of Government-administered price fixation and simplification of the taxation framework.

Welcoming the reform-oriented announcements for the Alcobev sector in the Karnataka Budget for FT26/27, Anant S Iyer, Director General, Confederation of Indian Alcoholic Beverage Companies (CIABC), said rationalisation in the excise slabs is a positive step, which is going to be beneficial for certain segments of the industry.

The State Government has reduced the number of slabs while giving the freedom to increase the basic price within the slab. However, the free pricing mechanism has always been existing till two years ago when the Karnataka excise introduced the comparison of prices with neighbouring states at the time of price fixation; this is now possibly being done away with, thankfully.

Iyer added that if the duty slab rationalisation is accompanied by increase in duty in slabs 1 to 4 which constitutes 85 per cent to 90 per cent approx of Spirits sales in Karnataka (in the absence of country liquor) and is the primary driver for the excise revenue collection, then such an increase will lead to a further drop in sales in these slabs and adversely impact revenue in the medium term.  As it is on account of the AED increase last year, these slabs, which cater to the masses has degrown by 6 per cent YTD, he added.