Karnataka Introduces India’s First Alcohol-Based Excise Duty System for Liquor

The Karnataka government has rolled out a new Alcohol-in-Beverage (AIB)-based excise duty structure , becoming the first state in India to adopt a taxation system based on the actual alcohol content in liquor products. The revised policy came into effect from May 11 following the announcement made in the 2026-27 Budget by Chief Minister Siddaramaiah.

In a statement issued on Sunday, the State Excise Department said the move aims to rationalise liquor taxation , make alcoholic beverages more affordable for consumers and align retail prices with neighbouring states such as Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra and Kerala.

Under the new framework, excise duty will be calculated on the basis of pure alcohol content rather than fixed product categories. Officials described the AIB model as a globally recognised taxation standard that improves transparency and ensures a more scientific pricing mechanism.

The government has also completely deregulated the price fixation process , allowing liquor manufacturers to determine product placement within slabs according to market demand and pricing strategies. As part of the restructuring, the number of Indian Made Liquor (IML) slabs has been reduced from 16 to 8.

Officials said the reform is expected to benefit the state exchequer by improving tax efficiency, reducing pricing distortions and discouraging cross-border liquor purchases from neighbouring states with lower prices. The simplified slab structure is also likely to improve compliance and streamline revenue collection for the Excise Department.

The revised rates apply to several popular IML and beer brands, with prices varying based on alcohol percentage, pack size and slab classification .