Higher ABV spirits to face higher tax in Karnataka
Karnataka, a state in southwestern India, is set to overhaul its liquor tax regulations, moving to a system where alcohol is taxed based on alcohol strength, in a move that could revamp the spirits landscape.
The Karnataka Government has issued a draft notice setting out a new ‘Alcohol in Beverage’ (AIB) policy, which will determine alcohol tax by the percentage of alcohol content (ABV) in the product.
The move will make Karnataka the first state in India to adopt the AIB taxation model, which is frequently practised in Western markets like Finland and the United Kingdom.
For decades, liquor in the region has been taxed based on multiple pricing slabs, meaning alcohol is taxed based on price buckets or arbitrary categories as opposed to ABV. This system has been criticised for creating market distortions and fuelling the consumption of stronger drinks.
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Officials hope that the proposed amended framework will simplify the structure and lead to greater transparency.
If finalised, the revised system could significantly revamp the price of liquor across categories.
The draft, which will be open to public objections and suggestions for a week before final consideration, makes revisions to the Karnataka Excise (Excise Duties and Fees) Rules, 1968.
AIB is defined as the measure of alcohol per litre across categories like wine, beer, rum and whisky.
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