Karnataka has become the first state in India to introduce an Alcohol-in-Beverage (AIB)-based excise duty system, replacing the earlier bulk litre-based taxation model. The new framework came into effect on May 11 and aims to restructure liquor taxation according to alcohol content while keeping prices competitive with neighbouring states.
The Karnataka excise department described the reform as a globally recognised taxation model that directly links excise duty to the percentage of alcohol in beverages rather than overall volume. The move was first proposed by the K.P. Krishnan-led Resource Mobilisation Committee and later announced by chief minister Siddaramaiah in the 2026-27 state budget.
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Under the revised structure, the number of Indian Made Liquor (IML) slabs has been reduced from 16 to eight. The government has also removed direct price fixation, allowing producers to position products within various pricing slabs depending on alcohol content and market demand.
Officials said the reform was introduced to align Karnataka’s liquor prices with neighbouring states such as Tamil Nadu, Telangana, Andhra Pradesh, Maharashtra and Kerala. Revised retail prices will apply to products manufactured after May 11.
Industry estimates suggest that mild and lager beers with around 5% alcohol content could become 20-25% cheaper, while premium Scotch whisky prices may decline by nearly 20%. Imported and premium alcoholic beverages sold by multinational companies are also expected to witness price cuts.
However, low-cost liquor categories may become significantly more expensive. Trade bodies said prices of 180ml tetra packs of whisky, rum, gin and vodka could increase by 20-30% under the new slab structure.
Industry associations argued that the revised framework imposed a higher tax burden on budget liquor products manufactured largely by Karnataka-based distilleries, while premium categories received lower excise duties.
