Karnataka’s excise licence fee hike may drive small and micro-distilleries away

As Karnataka hikes its fees, neighbouring Andhra Pradesh is reaching out to entrepreneurs in Karnataka to shift their manufacturing units. The flipside of the licence fee increase is that it will lead to higher costs for consumers as trade will find ways to pass this cost onto the consumers.

Synopsis: Micro-distilleries feel the government has overlooked their concerns by going for a one-size-fits-all taxation. Earlier, the government had slashed the initial proposal of a 100% by half following objections.

Distilleries in Karnataka, especially the smaller ones and start-ups, are up in arms against the hike in annual licence fees for distilleries.

The Karnataka government is set to increase the annual licence fee for distilleries in the state by 50%, effective 1 July. This is a reduced rate from an earlier proposal of a 100% increase, which saw objections from the industry players.

On 23 June, Aruna Urs from Huli Spirits Pvt. Ltd., posted on X: “The state government is forcing #huli to move out of Mysuru to Goa or Maharashtra. The annual distillery licensee fee has been increased by 50%! Is this @INCIndia idea of ease of doing business @RahulGandhi @siddaramaiah?”

In the post, he shared a copy of the notification and also his letter to the Principal Secretary, Department of Finance, dated 19 May.

The state government is literally forcing #huli to move out of Mysuru to Goa or Maharashtra. The annual distillery licensee fee has been increased by 50%! Is this @INCIndia idea of ease of doing business @RahulGandhi @siddaramaiah? pic.twitter.com/nZh2BAi6H8
— Aruna Urs (@Arunaurs) June 23, 2025

Also Read: Officials to be held accountable for missing commercial tax targets

Call for fair game

“Huli Spirits is a small craft distillery focused on bringing traditional Indian alcoholic beverages back into vogue. Our flagship product, Huli, is a 100 percent jaggery rum with raw material sourced from farmers in and around Mysuru. We are already paying a very high license fee of ₹63,10,000 per year, and the proposed hike in distillery licence and bottling fees will be a fatal blow to our enterprise. The government has so far earned more than ₹3.6 crores in various fees and duties from Huli Spirits, and we have been selling our product only since October 2024. The proposed hike will only lead to the concentration of large companies at the expense of small entrepreneurs.”

He had also made a request. “We kindly request you to create a new craft distillery category for small makers like ours on the lines of the existing craft brewery category, with a cap on annual production. This will give us an opportunity to survive and a fair shot at growing our business. The move will encourage many budding entrepreneurs who are going to Goa to set up their ventures (annual licence fee of ₹20 lakh) to consider Karnataka favourably. Such a move will create local jobs and vibrancy in the retail sector that Karnataka is well known for.”

The next day, he posted on X again: “Got a call from a neighbouring CM’s team with an offer to tailor excise policies to suit #huli. They had tracked me down via Twitter. That is some commitment to governance and prosperity! Meanwhile, we now operate in our CM’s constituency and half of our team are his voters!”

Got a call from a neighbouring CM’s team with an offer to tailor excise policies to suit #huli. They had tracked me down via twitter. That is some commitment to governance and prosperity! Meanwhile, we now operate in our CM’s constituency and half of our team are his voters! https://t.co/rHuqJdSGMp
— Aruna Urs (@Arunaurs) June 24, 2025

Also Read: ‘Fight for land is fight for identity’, say Devanahalli farmers

‘It’s extortion!’

Responding to South First, Urs said, “The blanket 50% revision of excise licence fee (from manufacturers to retail vendors) is nothing but extortion. We are a small craft distillery focusing on bringing back traditional alcohols of our country. We make quality, not quantity, and we have been in business for only three years.”

“Despite our request to fix the licensing fee based on the output, the government has ignored it and has taken a lazy approach to tax everyone the same. The blanket hike is neither equitable nor does it make economic sense. There are small retailers (bottle shops and bars) too, who have been put into hardship because of this,” he added.

He claimed the government says that the revision had not been done for the past eight years. “The total additional revenue mop-up from this exercise will probably touch ₹300 crores. The downside risk from this increase is that it will lead to increased costs for consumers as trade will find ways to pass this cost onto the consumers. Alcohol in Karnataka is already heavily taxed, and this will make it even more expensive.”

South First contacted Excise Minister RB Timmapur for a comment on the issue, and to know if the government has any plans to ease the smaller distilleries’ burden. “I am now in Hyderabad, and when I come to Bengaluru, come and discuss it with me,” the minister said.

(Edited by Majnu Babu).