Karnataka's Rising Beer Taxes: Trouble Brewing for Industry Growth

The Brewers' Association of India has urged Karnataka's government to halt beer tax hikes, warning it threatens Rs 5,000 crore in investments. Taxes rose three times since July 2023, stunting sales and lowering tax revenues. Beer contributed Rs 5,500 crore to state revenues, disproportionate to its sales share.

The Brewers' Association of India (BAI) has raised concerns over Karnataka's increasing taxes on beer, warning that additional hikes could jeopardize Rs 5,000 crore of investments in the state's beer industry. The association argues that frequent tax increases have choked the industry's growth and reduced state tax revenues.

Since July 2023, Karnataka has implemented three tax hikes on beer, with the latest in January 2025. These incremental changes have already begun to significantly impact sales volumes, marking a concerning shift towards contraction for the first time. The BAI attributes this to a steep increase in excise duties, which rose from 185 percent to 195 percent, severely affecting industry dynamics.

Despite contributing Rs 5,500 crore to Karnataka's tax revenues in 2023-24, the beer industry's growth has stalled. Its tax contribution is notably high, given it only represents 8 percent of alcoholic beverage sales yet forms 16 percent of tax revenues. The BAI pleads with the government to reconsider further tax increases, urging retention of Karnataka's position as a favored investment hub for breweries.

(With inputs from agencies.)