-KH News Desk (editorial1@imaws.org)
In a complete restructuring of its liquor market, the Karnataka State Excise Department has implemented a new Alcohol-in-Beverage (AIB) based excise duty framework. Making Karnataka the first state in India to adopt this system, the policy officially came into effect on May 11, 2026, following an amendment to the Karnataka Excise Rules, 1968.
The transition completely replaces the state’s six-decade-old bulk-litre taxation system. Under the new AIB model, duties are calculated precisely based on the percentage of alcohol by volume (ABV) rather than the total fluid volume of the product.
Key Institutional Changes:
Market-Driven Deregulation: The AIB system removes rigid, government-administered price fixation. Distillers and brewers now have the autonomy to position their brands within pricing slabs using market dynamics and alcohol content.
Streamlined Excise Slabs: To simplify operations and boost transparency, the number of Indian-Made Liquor (IML) slabs has been rationalized and drastically reduced from 16 to eight.
Fiscal Target: The sweeping regulatory overhaul is designed to align Karnataka’s pricing with neighboring states like Maharashtra and Tamil Nadu while aiming for an ambitious excise revenue target of ₹45,000 crore for FY27.
Dual Impact on Market Pricing:
Premium Products and Beer Become Cheaper: Because taxes now scale directly with alcohol content, lower-strength beverages see steep drops. Prices for mild and lager beers (5% ABV) and premium imported Scotch whiskies are dropping by 20% to 25%.
Budget Liquor Becomes Pricier: Conversely, the first five excise slabs—which account for nearly 70% to 75% of the state’s excise revenue—have seen an additional excise duty hike of 20% to 30%. This means entry-level spirits and popular 180ml tetra packs will become significantly costlier.
Industry trade bodies, including the Brewers Association of India, have strongly welcomed the move. They point out that taxing the actual alcohol rather than the liquid bulk serves as a global gold standard that naturally incentivizes moderate, less harmful alcohol consumption habits.
