CIABC welcomes Karnataka Budget reforms for alcohol industry, seeks clarity on duty structure

Mr. Anant S. Iyer, Director General of the Confederation of Indian Alcoholic Beverage Companies (CIABC), welcomed several reform-oriented announcements for the alcohol beverage (AlcoBev) sector in the Karnataka Budget for FY 2026–27.

He said the government’s decision to rationalise excise duty slabs is a positive move that could benefit certain segments of the industry. The state has reduced the number of duty slabs and allowed companies more freedom to increase prices within each slab.

Mr. Iyer noted that a free pricing system had existed earlier, but about two years ago the Karnataka excise department introduced a rule that required alcohol prices to be compared with those in neighbouring states before being fixed. He said this restriction now appears likely to be removed, which the industry welcomes.

However, he cautioned that if the restructuring of duty slabs leads to higher duties in slabs 1 to 4, it could hurt the market. These slabs account for around 85–90% of spirits sales in Karnataka and are the main source of excise revenue for the state. Increasing duties in these segments could reduce sales and eventually affect government revenue in the medium term.

He also pointed out that these segments have already seen a 6% decline in sales so far this year after the additional excise duty (AED) was increased last year.

Mr. Iyer added that the future structure of alcohol-based duties is still unclear, and the industry is waiting for more details from the government.

He also warned that policies favouring beer over Indian Made Foreign Liquor (IMFL) could reduce IMFL sales. Since the excise revenue from each case of IMFL is four to five times higher than beer, such a shift could eventually reduce the state’s overall excise income.

Mr. Iyer also expressed concern that the wine industry’s demands may have been overlooked. While the budget mentions distilleries and breweries, it does not specifically address wineries, despite separate representations made by the wine sector.

At the same time, he welcomed the government’s initiatives aimed at improving ease of doing business and modernising the alcohol sector.

Mr. Iyer said the budget announcements provide an early indication of the state’s upcoming excise policy. He added that the industry will continue to work with the government to help shape a policy that benefits the industry, the government, traders, and the people of Karnataka.