Karnataka’s New Alcohol Tax Plan Boosts Liquor Stocks Up To 3% In Early Trade

Shares of liquor companies, including Tilaknagar Industries, Radico Khaitan and United Breweries, gained up to 3% in early trade on 20 April after Karnataka proposed a major change to its decades-old alcohol taxation system.

At 11:52 am, Tilaknagar Industries shares were trading 2.55% up at ₹482 a piece on the National Stock Exchange (NSE). At the same time, Radico Khaitan and United Breweries shares were up by 3.23% and 2.19%, respectively.

Shift To Alcohol Content-Based Tax

The Karnataka government on Saturday issued a draft notification to amend the Karnataka Excise (Excise Duties and Fees) Rules, 1968. It plans to shift to an alcohol-in-beverage (AIB) based excise duty, where tax will depend on the actual alcohol content in a product rather than fixed price slabs.

The proposal reduces the number of pricing slabs from 16 and introduces a structure where higher alcohol strength attracts a higher tax. Karnataka would become the first state in India to implement such a model if the amendment is cleared.

The rollout will be done in phases, where:

• Higher taxes are likely on lower-priced liquor in the first four excise slabs, typically with 42.8% alcohol content

• Premium categories such as Scotch (bottled in origin, 40% volume per volume v/v) may see lower prices

• Mild beer, with less than 5% alcohol, could attract lower taxes

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Impact On Companies And Market

Brokerages said the policy is positive for spirits and beer companies. They expect lower taxation on premium segments to ease pricing pressures and support volume growth. Brokerages also noted that the proposed India-UK free trade agreement, expected to take effect from the second quarter, could support margins for spirits makers.

Note that Karnataka remains a key market for several listed players. It is a major contributor to the premium portfolio of United Spirits, which includes brands such as McDowell’s No. 1 and Royal Challenge. Also, Tilaknagar Industries holds a 39% market share in the “Prestige and Above” segment in the state.

High-Tax State Looks To Rework Structure

Karnataka is among the largest liquor-consuming states in India and also one of the highest tax regimes for alcohol. The shift to the new alcohol taxation aims to make the system simpler by linking duty directly to alcohol content. The proposal comes as states look to protect revenue without hurting industry growth.

Sources:

Moneycontrol

Deccan Herald