Though the state would lose a revenue of Rs 1905 crore per annum, the government's intention was to make the state 'intoxication free', he told mediapersons.
He said the effort was mainly due to the spread of anti-liquor campaign by several 'Stree Shakti' self-help groups which had moulded public awareness and had mounted an agitation against the arrack vendors in several villages.
Expressing confidence that the government would compensate the revenue loss through other sources, Mr Yediyurappa said that the government would also put in place stringent measures to check the menace of illicit arrack that may be brewed after the ban.
The 10-month old JD(S)-BJP coalition government was keen to ensure the implementation of various welfare programmes it had announced, he added.
As per the budget estimate, the state was likely to collect Rs 4060 crore through excise revenue this fiscal, out of which Rs 1905 crore would came from the sale of arrack.
''The money spent for social development is being used for drinking arrack. Though government gets revenue from tax on arrack, we do not need such a revenue which badly affected poor families.
Chief Minister H D Kumaraswamy and I had been discussing to put an end to this social problem for some time. This government has the political will hence we are initiating this action,'' he said.
The state government would also take steps to curb the increasing lottery menace, he said adding that it would take stringent steps to regulate lottery run by agencies other than that from Karnataka.
Stating that the JD(S)-BJP government's initiatives to ensure fiscal discipline and streamline tax collection had gained national attention and was hailed by the Planning Commission, he said the state was set to achieve a 30 per cent jump in tax collection this fiscal. The budget estimate was pegged at Rs 22,514 crore, compared to Rs 16,958 crore last year. Till December it had already collected Rs 16,958 crore logging a 30.56 per cent growth and was fully confident of surpassing the target, he added.
The Deputy Chief Minister further said Karnataka was one of the most successful states in collection of Value Added Tax (VAT) through which it had received Rs 10,151 crore till December this year. It was hopeful of achieving the target of Rs 14,190.51 crore during this financial year.
''By taking up an extensive registration drive, the government had brought under VAT 48,598 new dealers and at least 25,000 more would be added by the end of the fiscal. This was in addition to the existing 3.03 lakh traders who had already registered themselves under the VAT scheme,'' he added.