The state of Karnataka is set to revamp its liquor policy that might make alcohol cheaper. The Karnataka Chief Minister (CM) Siddaramaiah has made the decision, ending more than six-decades-old provisions of the Karnataka Excise Act by proposing reforms in liquor taxation and regulatory framework. Here’s in-depth information about the new alcohol-in-beverage based excise duty that Karnataka plans to adopt.
The new alcohol-in-beverage (AIB)-based excise duty system will replace the current system from April 2026. This would make Karnataka the first state in India to directly link liquor taxation to the alcohol content of a liquor or alcoholic beverage.
Karnataka CM Siddaramaiah stated that the government will adopt an ‘alcohol-in-beverage’ based excise duty structure. This is globally recognized as the gold standard for alcohol taxation.
He stated major reforms in the state’s liquor taxation and regulatory framework on Friday, March 6, 2026. Presenting the state budget in the Karnataka Assembly, he stated that the government plans to introduce an alcohol-in-beverage excise duty structure. He reportedly said, “An Alcohol-in-Beverage based excise duty structure is globally recognized as the gold standard for alcohol taxation, as it directly targets the alcohol content which is the primary source of negative externalities”.
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The new system will be implemented from April 2026 and will link tax rates directly to the amount of alcohol in a drink. The excise duty will be calculated on the alcohol content per liter instead of the total volume of the beverage.
Under the new system, liquor with higher strength will be taxed more. This means that a whiskey with an alcohol content of 50 per cent will get taxed more compared to a beer that has an alcohol content of 4 to 8 per cent.
Siddaramaiah stated, “While it (AIB-based excise duty) is being implemented from April, the Resource Mobilization Committee (RMC) constituted by our government will shortly submit its draft report outlining the principles for a modern excise taxation and alcohol regulatory framework. However, the RMC report initially would be placed in the public domain for consultation, and then the reforms that require legislative approval will be introduced in the form of a new excise Bill”.
He further stated that there will be a uniform level of excise duty whereas additional excise duty (AED) will be levied within a defined range based on an ex-factory price slab basis. The system of levying uniform excise duty based on the alcohol content per liter will be introduced in phases in the next three to four years. Siddaramaiah clarified that these changes will be gradual to avoid disruption in the market.
The Government of Karnataka plans to cut down pricing categories to eight from sixteen and allow producers to decide on prices. Under the new framework, Karnataka will deregulate government price fixation. The government aims to modernize the decades-old excise system, improve transparency, simplify pricing, and promote ease-of-doing business.
The Karnataka Government will focus on promoting alcohol-linked tourism. This includes a focus on tasting sessions and on-site sales at distilleries. Distilleries and breweries could be permitted to operate for 24 hours. Additionally, beer labels will not be required to disclose malt and sugar content mandatorily.
The government also plans to bring technology-driven systems to curb leakages and improve tracking of liquor movement across Karnataka. The government plans to introduce geofenced e-lock systems to replace physical escorts for dispatches. This is to ensure transparency and enable real-time data oversight. For implementing all of the above reforms, the government has set an ambitious excise revenue target of INR 45,000 crore for financial year 2026-27.
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With the new alcohol-in-beverage based excise duty set to be implemented in Karnataka from April 2026, the state will become the first in India to do so. The new excise duty will tax liquor based on its alcohol content with an aim to modernize decades-old excise systems. Along with it, the government will focus on promoting alcohol-linked tourism and introduce technology-driven systems to ensure transparency.
