New ‘Alcohol-in-Beverage’ tax model triggers price concerns in Bengaluru

Bengaluru: The state government’s move to overhaul its liquor excise policy has triggered uncertainty across the city’s spirits market.

Under the draft rules, taxation will be directly linked to alcohol content per litre. For distributors, the rate is fixed at Rs 1,000 per litre of pure alcohol.

"The shift to taxing pure alcohol per litre is a major reform,” said a representative of the Federation of Wine Merchants’ Association. "Our concern is the compression of pricing slabs. Mid-range brands could be pushed into higher premium categories due to the recalibration of tax incidence."

"The big winners appear to be premium players such as Diageo and United Breweries, as deregulation allows them to price their labels more competitively without seeking state approvals,” he added.

For instance, brands previously in Slab 5 (Rs 651–750) are now being merged into broader categories, where the Additional Excise Duty (AED) per litre of pure alcohol increases sharply as prices rise.

For beer, the draft proposes a tax of Rs 12 per bulk litre for products with up to 5% alcohol, and Rs 20 for those up to 8%.

“We expected a 10–15% drop in beer prices,” said a customer at an MRP outlet. “But breweries are using price deregulation to offset rising logistics costs. The tax is lower, but the MRP remains unchanged.”

However, local microbreweries and small-scale wineries say they have been overlooked. The association also warned that the pure alcohol–based taxation model could hurt the low-cost liquor segment prevalent in rural areas.

The government is targeting Rs 45,000 crore in revenue for FY 2026–27. The Finance Department has given stakeholders seven days to submit objections before finalising the rules.