Karnataka beermakers rue tax hikes, seek revision of levies on premium brews

Karnataka, housing the country’s beer capital Bengaluru, has levied two consecutive additional excise duty (AED) hikes on beer over the past seven months. The levy is resulting in consumers shifting to high strength alcohol beverages, industry players rue. Beers makers are demanding state to reconsider the taxation levied on the premium beer segment that contributes more excise revenue to the state.

The state has recently levied a 10 per cent increase in additional excise duty (AED), raising it from 185 195 per cent AED for the beer industry. This adjustment translates to a rise of ₹810 per 650 ml bottle of beer. This continuous escalation of taxes to the already elevated cost of beers in Karnataka, is nudging them to cheaper high strength alcohol beverage options, argues the industry.

TAX HIKES

“The beer industry in Karnataka has witnessed strong doubledigit growth in 2023 and despite this, the beer industry witnessed two consecutive tax hikes in the last seven months. Beer in Karnataka is one of the most expensive in the country, shifting consumers towards cheaper high strength alcohol beverage alternatives,” said AB InBev India spokesperson.

The tax levy’s contribution to Karnataka’s revenue has raised from ₹3250 crore in 2019 to ₹4460 crores in 2023. Beer makers are urging the state to look at differentiation between value and premium beer segments, considering the potential longterm impact on the state revenue.

“Rationalizing premium liquor excise duty structure is a welcome move however, we urge the policymakers in the state to reconsider the taxation levied on the premium beer segment that significantly contributes more excise revenue to the state. By capitalising on the demand for premium beer and implementing favorable taxation policies, Karnataka can foster a thriving beer culture that benefits both consumers and the state economy,” AB InBev India spokesperson further noted.

VALUE BEER SEGMENT

The value beer segment has risen to around 40 per cent in 2023 whereas premium beer segments have declined due to frequent tax revisions. Industry players note that the industry growth is largely led by value segment, preventing consumers from premiumisation and limiting excise revenues from premium brands.