Beer sales down in Karnataka due to high taxes; affecting revenue: BAI

New Delhi: The beer industry has urged the Karnataka government not to go for any further tax increase as it may lead to reduced sales volumes in the state and put investment of over Rs 5,000 crore in breweries at risk.

Frequent increases in taxes in Karnataka in recent times have affected growth from the beer industry and have also brought down tax revenues, the Brewers' Association of India (BAI) said in a letter to the state government.

Taxes on beer have been increased three times in the last 18 months -- in July 2023, February 2024, and January 2025, and as a result, the growth in sales of beer in the state, which has always been healthy, has "slumped to stagnation", it said.

"After the third tax increase in January 2025, beer sales have actually started contracting for the first time," said a letter by BAI Director-General Vinod Giri.

BAI is the apex body of the beer industry representing India's largest beer makers such as United Breweries (owned by Heineken, AB InBev, and Carlsberg, which together account for 85 per cent of the beer sold in India.

"We are at pains to point out that frequent increases in taxes in recent times have taken away growth from the beer industry, put massive investments made by the industry in the state at risk, and have also brought down government tax revenues," it said.

In February last year, Karnataka increased the additional excise duty on beer from 185 per cent to 195 per cent. Later in January 2025, the excise duty was increased Rs 10 per bulk litre, or Rs 78 per case, on most of the beer sold in the state.

"Further, the negative impact of tax increases on sales is getting worse with every increase. After the third tax increase in January 2025 beer sales have started contracting for the first time," it said.

Moreover, it will also force consumers to shift to cheaper options, leading to a revenue loss for the government.

The beer industry contributed over Rs 5,500 crore in 2023-24 to the Karnataka tax revenues. Its contribution is "disproportionately high" as it accounted for just 8 per cent of the sales of alcoholic beverages in the state but 16 per cent of the tax revenues earned from it.

"Further, this share has been rising; it was 11 per cent five years ago and is now 16 per cent," it said.

According to BAI, Karnataka has been a favoured investment destination for the beer industry, where its members have invested Rs 3,500 crore so far. There are over 10 breweries in the state -- the highest for any state in India.