The Karnataka government on Friday proposed removing state control over pricing of liquor and switching to a duty system based on percentage of alcohol content.
Presenting the state budget before the Assembly, Chief Minister Siddaramaiah said the reforms would modernize the state’s decades-old tax framework and introduce a tax method commonly used internationally. The new model, called the Alcohol Excise Duty Structure (AIB), links tax rates directly to the amount of alcohol in a drink.
“The alcohol-based tariff structure in beverages is globally recognized as the gold standard for alcohol taxes, as it directly targets alcohol content which is the main source of negative externalities,” he said.
The system is scheduled to go into effect in April 2026.
The Prime Minister added that the transition from the current duty structure will take place gradually over three to four years to prevent market disruption. Under the new framework, customs duties will be calculated on the alcohol content per liter rather than the total volume of drinks.
The government also plans to change how alcohol prices are set. At present, the state plays a role in setting retail prices, but this mechanism will be removed under the new policy. “The placement of the product inside the panels will be left to the producers based on market considerations,” Siddaramaiah said.
The budget also proposes to simplify the pricing structure of alcoholic beverages by reducing the number of price categories. He added: “The pricing slabs will be rationalized and reduced to eight slabs out of the existing 16 slabs.”
Target revenue department is set $45,000 crore for the financial year 2026-27.
The Brewers Association of India (BAI) has hailed the shift to the new excise duty structure as transformative. “It (the new system) reflects the global gold standard in alcohol taxation, where the tax is levied on the alcohol content rather than the water present in drinks. No country has adopted such a structure yet. If implemented in line with this principle, beer and wine could become cheaper,” said Vinod Giri, director general, BAI.
