CM Siddaramaiah Announces Sweeping Reforms in State Liquor Taxation & Regulatory Framework

Karnataka Chief Minister Siddaramaiah on Friday announced sweeping reforms in the state’s liquor taxation and regulatory framework, including the introduction of a new alcohol-based duty structure, deregulation of price fixation and technology-driven monitoring systems.

He set an ambitious revenue target of Rs 45,000 crore from the excise sector for 2026–27.

Presenting the state budget in the Assembly, the chief minister said the government would modernise the state’s decades-old excise framework and introduce reforms aimed at improving transparency, compliance and ease of doing business.

The chief minister said Karnataka would adopt a globally recognised taxation system that links excise duty to the alcohol content of beverages.

"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.

This will be introduced from April 2026, Siddaramaiah added.

According to the chief minister, the new system will gradually replace the current duty structure and rationalise pricing across alcoholic beverages.

There will be a uniform level of excise duty whereas additional excise duty will be levied within a defined range based on an ex-factory price slab basis, he said.

The system of levying uniform excise duty based on the alcohol content per litre will be introduced in stages in the next three to four years, Siddaramaiah said, adding that price changes would be gradual to avoid disruption in the market.

The government will also completely deregulate the price fixation mechanism currently administered by the state.

"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," he said.

"To simplify the structure further, the number of pricing slabs for alcoholic beverages will be reduced significantly. Pricing slabs will be rationalised and reduced to eight slabs from the existing 16 slabs," Siddaramaiah said.

Alongside policy changes, the government is introducing technology-driven systems to curb leakages and improve monitoring of liquor movement across the state.

Physical escorts for dispatches will be replaced with geo-fenced e-lock systems. These measures will enhance transparency and enable real-time oversight, the chief minister added.

Manufacturing licences will be auto-renewed, and label approvals, CL-5 (occasional licences) and RVB licences will be auto-generated upon online self-declaration and payment of fees, with deemed approval and no manual intervention, Siddaramaiah said.

He also announced that distilleries and breweries would be allowed round-the-clock operations. The requirement to display mandatory malt and sugar content on beer labels will also be removed, Siddaramaiah said.

In another move, the chief minister said tourism in the alcohol sector will be encouraged by allowing distilleries and breweries to conduct tasting sessions and sell products manufactured on their premises to visiting tourists, he said.

Siddaramaiah also highlighted administrative reforms within the Excise Department aimed at increasing transparency.

The chief minister said the Resource Mobilisation Committee constituted by the government will soon submit a draft report outlining a modern excise taxation and alcohol regulatory framework for the state.

“The proposed reforms aim to strengthen transparency, modernise the excise regulatory framework and promote ease of doing business in the excise sector across the State as per current requirements,” Siddaramaiah said.

He added that the draft report would be placed in the public domain for consultations before further legislative measures are taken.

“Beyond the measures rolled out above, those reforms that require legislative approval will be introduced in the form of a new and comprehensive Excise Bill,” he said.

Highlighting the sector’s importance to the state’s finances, Siddaramaiah said excise revenue had registered strong growth during the current financial year.

“Revenue collections up to February, in the financial year 2025–26, have reached Rs 36,492 crore, reflecting a growth of 12.7 per cent compared to the corresponding period of the previous year,” he said.

“The revenue collection target from State Excise for the financial year 2026–27 is Rs 45,000 crore,” the chief minister added.

Siddaramaiah said while the Excise Department would focus on taxation and regulatory compliance, the government would also address the social consequences of alcohol consumption through public health measures.

“The Excise Department will focus on taxation and compliance, while the Health Department will address the social costs of alcohol consumption through public health interventions, de-addiction and rehabilitation initiatives,” he said.

The state government has set a revenue collection target of Rs 29,000 crore for Stamps and Registration, Rs 15,500 crore from motor vehicles and Rs 11,000 crore from royalty on mines for the financial year 2026–27.