Karnataka becomes first state to tax liquor by alcohol content; premium alcohol to get upto 25% cheaper

The Karnataka government has officially implemented its new Alcohol-in-Beverage (AIB) based excise duty structure. The Karnataka government has introduced an AIB-based excise duty structure for alcoholic beverages, effective May 11, 2026. This initiative aims to lower prices for consumers, rationalize liquor costs, and replace the previous bulk litre-based system with a model based on alcohol content.

This landmark reform, which replaced a six-decade-old bulk-litre taxation system, has led to a major re-pricing of Indian-Made Liquor (IML) and beer brands across the state.

Karnataka has become the first state in the country to adopt the AIB model, introducing a system where taxes are calculated based on the precise percentage of alcohol content in the beverage rather than its total volume. For the first time in India, the AIB-based excise duty structure has been implemented in Karnataka from May 11, 2026. It is globally recognised as the gold standard for alcohol taxation," the Karnataka Excise Department said in a statement.

AIB-based excise duty structure was announced by Karnataka Chief Minister Siddaramaiah in the 2026-27 Budget, and according to the Excise Department, the new rules officially came into effect on May 11, 2026.

As part of this comprehensive restructuring, the state government has streamlined its tax framework, reducing the total number of excise slabs from 16 down to 8. While the move has brought relief to premium consumers by slashing the prices of high-end scotch whiskies and mild beers by 20–25%, budget liquor offerings widely consumed by lower- and middle-income groups have seen an upward surge of 20–30%.