This paper analyses the Karnataka government's pioneering shift towards a strength-based excise duty levied per litre of alcohol in beverage (LAIB), with a proposed benchmark of ₹2,000 per LAIB by FY 2028–29. This reform, proposed in the Karnataka State Excise Reforms 2026 Draft Report, moves away from the long-standing price- and product-based taxation system to a Pigouvian model that seeks to internalise the social cost of alcohol consumption, estimated at 2.0% of GSDP, amounting to approximately ₹51,000 crore annually. Drawing on doctrinal constitutional analysis and empirical evidence, the paper argues that the proposed duty is both constitutionally sustainable and economically efficient. It is firmly grounded in the state’s legislative powers under Entries 51, 8 and 54 of List II and Article 366(12A) of the Constitution and does not amount to colourable legislation seeking to disguise a fee as a tax. The paper examines the intermediate glide-path mechanism, broader tax architecture which includes VAT and deemed input tax credit, implementation challenges, and risk mitigation measures. Karnataka’s reform represents the first state-level attempt in India to align excise duty charged with the true social cost of alcohol. If implemented successfully, it can serve as a model for other states, resulting in a more coherent, evidence-based taxation system that balances harm reduction with revenue stability.