Karnataka entered the weekend with a different liquor policy, one that lets the companies decide the prices of their own products. As per a report by Motilal Oswal, Karnataka will shift to taxing liquor based on the actual alcohol content in the final product, while allowing manufacturers to determine their own product prices. Key alcobev stocks like United Spirits, UBL and Radico Khaitan are likely to be in focus.
The move is aimed at licence simplification as well. Manufacturing licences would be auto-renewed, while label approvals and occasional licenses (CL-5) are likely to be auto-generated through an online self-declaration mechanism, reducing manual intervention.
New liquor policy set to replace old one
This is set to replace the earlier system that benchmarked taxation using global classification standards and was aimed at simplifying the pricing structure with a transparent supply chain. As per the report, the transition to the alcohol-in-beverage (AIB) taxation system is expected to begin in April 2026 and will be implemented gradually over the next few years.
Alongside this change, the state has rationalised its pricing framework by reducing the number of slabs from 16 to eight. As per the report, this is expected to make the pricing structures easier for the companies to manage.
Karnataka a key market for liquor industry
Karnataka remains one of the most important markets for the alcohol industry, accounting for roughly 15% of the Indian Made Foreign Liquor (IMFL) sector, with spirits sales estimated at 65–70 million cases annually. The market is dominated by the popular and below segments, which together account for about 94% of the mix, the report added.
Simplifying licensing and approvals
The report further explained that manufacturing licences will be auto-renewed, while label approvals and occasional licences (CL-5) will be issued through an online self-declaration system, reducing manual intervention in the approval process.
The state also plans to replace physical escorts used for liquor dispatches with blockchain-based tracking systems and geo-fenced electronic locks. These measures are expected to improve supply-chain monitoring while streamlining logistics for companies, as per the report.
Tourism push and operational changes
Furthermore, the report added that the new framework seeks to expand industry engagement with consumers. Distilleries and breweries will be permitted to host tasting sessions and sell products directly to tourists visiting their facilities. The government describes this as ‘alcobeer tourism.’
The report further added that distilleries and breweries will be allowed to operate 24 hours a day, potentially improving production flexibility and capacity utilisation. The state has also removed the mandatory requirement to display malt and sugar content on beer labels, the report noted.
Revenue outlook and industry exposure
According to Motilal Oswal, the government expects the new policy framework to support higher excise collections, targeting revenue of Rs 450 billion in FY27 compared with about Rs 400 billion projected for FY26.
Several listed liquor companies have meaningful exposure to the Karnataka market. United Breweries and United Spirits each derive around 15% of their revenues from the state, while Radico Khaitan and Tilaknagar Industries have about 7% exposure, the report noted.
However, the market is worried as similar excise policies implemented in Delhi led to a lot of confusion and backlash from the centre. For now, companies are awaiting detailed operational notifications from the government before evaluating the full implications for pricing, taxation and supply chains.