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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.
Kingfisher beer bottles are seen in a cooler at a liquor shop in Kolkata, India, September 13, 2019. REUTERS/Rupak De Chowdhuri/File Photo(REUTERS)Karnataka has become the first state in India to have an Alcohol-in-Beverage (AIB)-based excise duty structure for alcoholic beverages. The move is aimed at rationalising liquor pricing, making alcoholic beverages available at cheaper rates for consumers in Karnataka and aligning prices with neighbouring states, including Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra and Kerala.
"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.
Alcohol-in-Beverage-based excise duty
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.
Karnataka would adopt a globally recognised taxation system that links excise duty to the alcohol content of beverages, the CM had said in March.
"An Alcohol-in-Beverage (AIB) 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 CM had also set an ambitious revenue target of ₹45,000 crore from the excise sector for 2026–27.
The proposal was first made by the KP Krishnan-headed Resource Mobilisation Committee as part of its report on Karnataka Excise Reforms.
How prices will be calculated
It replaces the bulk litre-based system with a new model that calculates pricing based on the percentage of alcohol in beverages.
Under the new rules, the government has rationalised liquor and beer product prices across the board. The revised MRPs apply to all products manufactured after May 11, 2026. The AIB structure deregulates government-administered price fixation. Instead of the state rigidly setting prices, producers now have the flexibility to place their products within specific pricing slabs based on market considerations and alcohol content.
Under the new policy, the government-administered price fixation has been completely deregulated. According to the government notification, Indian Made Liquor (IML) slabs have been rationalised and reduced from the earlier 16 slabs to eight slabs. Product placement within slabs has been left to the producers based on market considerations.
What gets cheaper and what becomes costlier
It is estimated that under the AIB-based excise duty structure, prices of mild and lager beers with 5 per cent alcohol have dropped by 20-25 per cent. Prices of premium Scotch whiskeys have also been reduced by 20 per cent.
However, the prices of the first five Excise slabs of Indian Made Liquor have increased by 20-25 per cent under the new policy.
As part of the changes, the Karnataka State Excise Department has also directed the publication of revised Maximum Retail Prices (MRP) for liquor and beer brands, detailing both prices and sizes, in leading state-level Kannada and English newspapers.
Key Takeaways
- Karnataka's AIB-based excise duty structure is a pioneering move in India, linking taxes to alcohol content.
- The reform aims to reduce prices of mild and lager beers and premium Scotch whiskeys while increasing some Indian Made Liquor prices.
- This change provides producers with flexibility in pricing, moving away from rigid government-set prices.
About the Author
Bobins Vayalil Abraham
Bobins loves telling the human side of all stories, from the intersection of geopolitics, international relations, and conflicts around the world. In his nearly one-and-a-half-decade career as a journalist, Bobins has covered South Asia, the Middle East, and North America, from elections to mass protests and conflicts. <br> Bobins has also done extensive reporting on environmental issues, climate change, and sustainability, focusing on solutions and people working to make the planet a better place to live. <br> In 2018, Bobins was awarded by Times Internet for the impact of his story on Delhi tree cuttings. Bobins also loves telling the stories of Indian startups and the journey of their founders. <br> Total Years of Experience: 14 <br> Years of experience at LM: Bobins has been a part of Live Mint since February 2026 <br> Interests: When he is not tracking conflicts, Bobins loves to cook, travel across India, click photos, and watch documentaries on history. Past Experience: Before joining Live Mint, Bobins worked with The Indian Express, where he led the Global Breaking News coverage, Indiatimes, where he led the news team, covering everything trending, ANI, where the focus of his coverage was South Asia, and NBS News. <br> Current Role: Bobins is currently working as an Assistant Editor at Live Mint.
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