Beer industry welcomes Karnataka’s draft notification on Alcohol based tax structure

Welcoming the Karnataka Government’s draft notification on the new tax structure for the alcobev sector, the Brewers Association of India (BAI) has said the AIB taxation structure based on the actual amount of alcohol in a product is a watershed moment, which will not only optimise revenue but also meet public health goals of moderation.

The Karnataka Government on Saturday (April 18) issued a Draft Notification to amend the Karnataka Excise (Excise Duties and Fees) Rules, 1968, to implement sweeping reforms in the state’s alcobev sector by introducing Alcohol-in-Beverage (AIB) based taxation structure besides announcing several other structural reforms.

These changes were earlier announced by Chief Minister K Siddaramaiah while presenting the Karnataka State Budget 2026–27 last month and are now in the process of notification.

The new rules, called the Karnataka Excise (Excise Duties and Fees Amendment) Rules, 2026, outline a taxation system which is based on the premise that the product to be taxed is the alcohol and not the water that accompanies it. 

This is the WHO-recommended gold standard for alcohol taxation and is widely followed in in the world, BAI said in a statement.

“By announcing an AIB-based taxation mechanism, Karnataka has become the first state in the country to explicitly link the revenue maximisation goal of the State with desired public health outcomes. We commend Honourable Chief Minister Siddaramaiah for bringing in such a major excise policy reforms in India. We hope that other states too will soon implement an explicit linkage of tax with alcohol content in their excise policy soon,” said Vinod Giri, Director General, Brewers Association of India.

While the BAI has wholeheartedly welcomed the AIB-based taxation, it believes that few suggestions regarding slabs in beer would improve this model further. BAI will soon be submitting this separately to the Karnataka Government.

The reforms in the new Excise rules go beyond to also bring about step changes in Ease of Doing Business for the alcobev sector such as full deregulation of Government-administered price fixation, simplification of taxation framework, auto-renewal of manufacturing licences, online approvals, 24-hour operations for distilleries and breweries, and creating tourism opportunities around breweries.

Such progressive steps will promote state’s economy and the industry and make Karnataka more attractive investment destination, Giri added.