Govt proposes shift to a duty system based on alcohol content percentage
Karnataka plans to remove state control over liquor pricing, shifting to an alcohol content-based duty system by April 2026 to modernize taxation
The Karnataka government on Friday proposed the removal of state control over liquor pricing and a shift to a duty system based on alcohol content percentage.
Presenting the state budget in the assembly, chief minister Siddaramaiah said the reforms would modernise the state’s decades-old excise framework and introduce a taxation method commonly used internationally. The new model, called the Alcohol-in-Beverage (AIB) excise duty structure, links tax rates directly to the amount of alcohol in a drink.
“An Alcohol-in-Beverage based excise duty structure is globally recognised as the gold standard for alcohol taxation, as it directly targets the alcohol content which is the primary source of negative externalities,” he said.
The system is scheduled to come into force in April 2026.
The chief minister added that the transition from the existing duty structure will take place gradually over three to four years to prevent disruption in the market. Under the new framework, excise duty will be calculated on the alcohol content per litre rather than the total volume of the beverage.
The government also plans to change how liquor prices are determined. At present, the state plays a role in fixing retail prices, but that mechanism will be removed under the new policy. “Product placement within slabs will be left to the producers based on market considerations,” Siddaramaiah said.
{{/usCountry}}The government also plans to change how liquor prices are determined. At present, the state plays a role in fixing retail prices, but that mechanism will be removed under the new policy. “Product placement within slabs will be left to the producers based on market considerations,” Siddaramaiah said.
{{/usCountry}}The budget also proposes to simplify the pricing structure for alcoholic beverages by reducing the number of price categories. “Pricing slabs will be rationalised and reduced to eight slabs from the existing 16 slabs,” he added.
{{/usCountry}}The budget also proposes to simplify the pricing structure for alcoholic beverages by reducing the number of price categories. “Pricing slabs will be rationalised and reduced to eight slabs from the existing 16 slabs,” he added.
{{/usCountry}}The excise department has been assigned a revenue target of ₹45,000 crore for the 2026–27 financial year.
{{/usCountry}}The excise department has been assigned a revenue target of ₹45,000 crore for the 2026–27 financial year.
{{/usCountry}}The Brewers Association of India (BAI) 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 in the beverage. No state has adopted such a structure so far. If implemented in line with this principle, beer and wine could become cheaper,” said Vinod Giri, BAI director general.
{{/usCountry}}The Brewers Association of India (BAI) 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 in the beverage. No state has adopted such a structure so far. If implemented in line with this principle, beer and wine could become cheaper,” said Vinod Giri, BAI director general.
{{/usCountry}}