Karnataka's Liquor Market Defies Economic Headwinds with Record Revenue
In a striking economic trend, liquor sales in Karnataka are experiencing a significant boom, with consumer demand for premium spirits showing a notable uptick despite repeated excise duty hikes, inflation, and higher prices. The state's excise department has reported robust collections, highlighting a shift in consumer behavior from lower-priced products to premium brands, which is driving a surge in revenue.
Excise Revenue Exceeds Targets Amidst High Taxation
Excise Minister R B Timmapur revealed that the excise department collected Rs 33,371 crore between April 1, 2025, and January 31, 2026, surpassing the target by a substantial Rs 3,910 crore. Karnataka currently imposes the highest liquor tax on premium brands in the country at 83%, making it the most expensive state to purchase alcohol. This high taxation follows significant excise duty increases since 2020.
Timmapur projected that the initial excise revenue target of Rs 40,000 crore for the fiscal year 2025-26 is likely to be exceeded. "We are now estimating the excise collection to be more than ₹43,000 crore by March-end," he added, emphasizing the department's confidence in continued financial performance.
Historical Context of Excise Duty Hikes
The surge in revenue comes against a backdrop of steady excise duty increases over the past five years, which have shaped the market dynamics:
- 2020: Additional excise duty on liquor was raised twice—by 6% in the budget in March and another 11% in May.
- 2023: Excise duty on liquor was increased by 20% across all slabs, while additional excise duty on beer was raised by 10%.
- 2025: The additional excise duty on beer was raised twice by 10% each time, resulting in a total hike of 20% for the year.
These measures have positioned Karnataka as a high-tax state for alcohol, yet consumer demand, particularly for premium products, remains resilient.
Enforcement and Anti-Corruption Measures Boost Collections
Minister Timmapur attributed the revenue growth to tighter enforcement and measures aimed at preventing revenue leakage. "Tighter enforcement and measures to prevent revenue leakage helped boost collections, along with vigilance against illicit liquor and drugs," he explained. He noted that excise remains a key contributor to state finances, with receipts higher than the same period during the last fiscal year.
Officials confirmed that excise is among the largest contributors to the state exchequer, underscoring its importance in funding public services and infrastructure projects.
Digitization and Procedural Reforms Address Corruption Allegations
In response to corruption allegations linked to transfers and licensing, Timmapur highlighted significant reforms. He cited digitization and procedural changes as key factors in reducing malpractice. The department renewed more than 14,101 licenses within 48 hours through online counseling and extended the renewal period from one year to five years to minimize opportunities for corruption.
Additionally, disciplinary action was taken against 158 officials, with cases distributed as follows:
- 85 cases at the department level
- 19 cases at the government level
- 54 cases with the Lokayukta
These steps reflect a commitment to transparency and accountability within the excise department, further bolstering public trust and revenue integrity.
As Karnataka continues to navigate economic challenges, the liquor market's performance offers insights into consumer resilience and the effectiveness of fiscal policies. With projections pointing to record-breaking collections, the state's excise revenue is set to play a pivotal role in its financial landscape for the foreseeable future.
