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Karnataka to become first state to introduce excise duty based on Alcohol-in-Beverage standard, new system to be introduced in phases

Following Karnataka CM Siddaramaiah’s budget speech, liquor stocks made steady gains.

Karnataka CM Siddaramaiah at the Vidhana Soudha on Friday. (Photo Credit: Special Arrangement)

4 min readBengaluruMar 9, 2026 09:12 AM IST First published on: Mar 6, 2026 at 09:28 PM IST

Chief Minister Siddaramaiah paved the way on Friday to end more than six-decades-old provisions of the Karnataka Excise Act by proposing reforms in liquor taxation and regulatory framework.

Siddaramaiah said the government is going to adopt the ‘Alcohol-in-Beverage’ (AIB) based excise duty structure, which is globally recognised as the gold standard for alcohol taxation. This will make it the first state in the country to introduce excise duty based on AIB.

“While it (AIB-based excise duty) is being implemented from April, the Resource Mobilisation Committee (RMC) constituted by our government will shortly submit its draft report outlining the principles for a modern excise taxation and alcohol regulatory framework. However, the RMC report initially would be placed in the public domain for consultation, and then the reforms that require legislative approval will be introduced in the form of a new excise Bill,” according to Siddaramaiah.

The chief minister further said, “There will be a uniform level of Excise Duty (ED), whereas Additional Excise Duty (AED) will be levied within a defined range based on an ex-factory price slab basis. We will ensure that the price changes are gradual and not disruptive. The system of levying uniform excise duty based on the alcohol content per litre will be introduced in phases in the next three to four years. Pricing slabs will be rationalised and reduced to eight slabs from the existing 16 slabs. Under the new policy, the government-administered price fixation will be completely deregulated. Product placement within slabs will be left to the producers based on market considerations.”

Reacting to the government’s announcement, the owner of one of the largest distilleries in Karnataka said, “The government has come up with the new policy because there has been a decline in the liquor industry. Beer consumption has reduced by 30 per cent, and the Indian Made Liquor (IML) market has shrunk by 5 per cent. Taking a cue from Europe and other nations like Australia, the government wants to introduce what we have opposed in the past. Europe and countries like Australia cannot be taken into consideration, as in India, hard liquor is consumed more. Now, the government wants to increase the volume to increase its revenue, but it is not likely to happen in Karnataka.”

Speaking to The Indian Express, Karnataka Excise Commissioner R Venkatesh Kumar said, “You will not see a phenomenal change in the prices of beer or even IML. We will see how the policy will unfold.”

Asked whether the excise duty reforms have been proposed as consumption was decreasing, Kumar refuted industry claims and said IML consumption was down by just 0.62 per cent and beer consumption by 14.2 per cent compared to previous years.

Validity of liquor shop licenses

Meanwhile, Siddaramaiah also announced that the validity of various liquor shop licenses has been extended from one year to five years. The online approval process has been streamlined from 16 stages to seven stages, and approvals are now granted within two days.

Siddaramaiah said the health department will address the social costs of alcohol consumption through public health interventions, de-addiction, and rehabilitation initiatives.

In order to prevent revenue leakages, the government is planning to roll out blockchain-based digital tracking systems, eliminating the need for physical escorts for dispatches.

In his budget speech, Siddaramaiah said, “Manufacturing licenses will be auto-renewed, and label approvals – CL-5 (occasional licenses), and RVB licenses (for a period of five years) – will be auto-generated upon online self-declaration and payment of fees, with deemed approval and no manual intervention. Distilleries and breweries will be permitted 24-hour operations and dispatch. The requirement to display mandatory malt and sugar content on beer labels will also be removed.”

Following Siddaramaiah’s budget speech, liquor stocks made steady gains. United Spirits shares shot up by 4.91 per cent, shares of United Breweries Ltd increased by 6.66 per cent, and those of Radico Khaitan Ltd saw an 8.52 per cent rise.