Karnataka to shift to alcohol content based excise duty

The Karnataka government has announced a major overhaul of its liquor taxation system, introducing an alcohol-in-beverage (AIB)–based excise duty framework from April. The reform is expected to potentially make beer and wine cheaper and will make the state the first in India to link liquor taxation directly to alcohol content.

Presenting the 2026–27 state budget, Chief Minister Siddaramaiah said the new structure will gradually replace the current uniform excise duty per litre of alcohol over the next three to four years. The transition will be implemented in phases to prevent market disruption and sudden price fluctuations.

Under the new system, the government will fully deregulate price fixation while reducing the number of pricing slabs from 16 to eight, a move aimed at simplifying the excise framework and improving transparency. The reform is also expected to enhance ease of doing business for alcohol manufacturers and distributors.

According to the chief minister, an AIB-based taxation model is widely regarded globally as the “gold standard” for alcohol taxation because it directly targets the alcohol content, which is considered the main source of social and health externalities associated with alcohol consumption. The state has set an ambitious excise revenue target of Rs 45,000 crore for the upcoming financial year.

The budget also proposes measures to boost alcohol-linked tourism in the state. Distilleries and breweries may be allowed to host tasting sessions and sell products on-site, while also being permitted to operate around the clock. Additionally, beer labels will no longer be required to disclose malt and sugar content.