OPINION | India’s alcobev imports face tariff reckoning in Budget 2026

India’s alco-bev industry seeks tariff rationalization.

With the Union Budget 2026-27 right around the corner, India’s alcoholic beverage industry is bracing for what’s next. Valued at $44 billion in 2024, the market is poised for growth, projected to cross $55 billion by 2027. However, the friction at the border continues to be a challenge. The central question remains whether the Finance Ministry will move toward a streamlined customs regime or if the industry will remain tethered to high-tariff legacy structures.

The Tariff Tangle

For years, the 150% basic customs duty (BCD) on imported spirits has acted as both a revenue generator for the exchequer and a barrier for premium international labels. Lately, though, the industry has undergone a few subtle shifts. In February 2025, the Central Board of Indirect Taxes and Customs (CBIC) reduced the duty on Bourbon whiskey to 50%, while keeping most other spirits at the standard 100% (excluding the Agriculture Infrastructure and Development Cess).

The operationalization of the India-UK Free Trade Agreement is stirring things up as well. Scotch whisky and gin, for example, now enter at a reduced 75% duty, with plans to drop even further, hitting 40% over the next decade. While these are welcome developments for global players, they have created a "customs conundrum": a fragmented tariff structure where different categories of the same spirit class are taxed at vastly different rates depending on their origin or specific sub-classification. It’s confusing, and it’s not getting any simpler.

The Litigation Bottleneck

Beyond the headline rates, the procedural aspect of customs remains a significant pain point. As of January 2026, an estimated ₹1.52 lakh crore in customs duty is locked in litigation across various sectors in India. For the alcobev industry, these disputes often center on valuation disagreements and classification under Harmonized System of Nomenclature (HSN) codes.

This leaves importers in a tough spot as their goods are often heldat the port under “provisional assessment,” and demurrage fees pile up fast. Margins shrink. The lack of a swift dispute resolution mechanism has created a backlog that hampers the "Ease of Doing Business" narrative often championed.

What the Industry Wants from Budget 2026

The industry’s wishlist for the upcoming budget focuses heavily on two pillars: procedural simplification and tariff rationalization.

* Customs Amnesty Scheme: There is strong anticipation that the government might introduce a one-time amnesty scheme, similar to the "Vivad se Vishwas" for direct taxes, to clear the ₹1.52 lakh crore backlog in customs disputes. For alcobev importers, this would provide a much-needed exit from long-standing valuation battles, freeing up working capital.

* Slab Rationalization: Currently, India operates with eight basic customs duty slabs. Reports suggest the Finance Minister may look to reduce these to five or six. For the alcobev sector, a more uniform duty structure would reduce the ambiguity that often leads to misclassification and subsequent penalties.

* Addressing Inverted Duty Structures: With more FTAs coming into play, there is a growing risk of inverted duty structures—where the duty on imported finished products becomes lower than the duty on raw materials or bulk spirits used for domestic bottling. The industry expects the budget to recalibrate these rates to ensure that "Made in India" remains competitive against direct imports.

The Impact of Change

If the budget successfully addresses these customs bottlenecks, the primary beneficiary will be the "premiumization" trend. India’s imports of alcoholic beverages saw a 74% year-on-year increase in 2023, driven by a young, urban demographic seeking global experiences. A more predictable customs environment would allow international brands to plan long-term investments in cold-chain logistics and specialized retail, rather than operating on a shipment-to-shipment basis.

The Path Ahead

The alcobev industry does not necessarily seek a "zero-tax" environment; there is a mature understanding of the government’s revenue requirements. What it seeks is predictability. A budget that prioritizes the digitization of the ICEGATE system and integrates it more seamlessly with state excise portals would do more for the industry than a marginal percentage cut in BCD.

As the sector matures, the goal should be to transform the customs department from a gatekeeper into a facilitator. Whether the 2026 Budget will take this leap remains to be seen, but the data suggests that the cost of maintaining the status quo—in terms of locked-up capital and lost growth—is becoming too high to ignore.

(Tushar Bhandari, Whole Time Director at Associated Alcohols & Breweries Ltd.)

Views are personal and do not represent the stand of this publication.