GST Council cedes right to levy tax on distilled alcohol to states

The GST Council on Saturday recommended to keep Extra Neutral Alcohol (ENA) used for manufacture of alcoholic liquor for human consumption outside GST. Addressing a press conference after the GST Council meeting, Finance Minister Minister Nirmala Sitharaman explained that the Allahabad High Court had ruled that the states had no power to impose tax on Extra Neutral Alcohol or ENA and this was solely in the domain of the GST Council and the Centre. ENA, which is the purest form of alcohol, is the primary raw material for making alcoholic beverages.

However, keeping the issue of healthy Centre-state relations in mind it was decided at GST Council meeting that this right would be “ceded to the states,” the finance minister said. ENA is the raw alcohol that is used to make alcohol for human consumption.

"GST Council recommended to keep Extra Neutral Alcohol (ENA) used for manufacture of alcoholic liquor for human consumption outside GST. Law Committee will examine suitable amendment in law to exclude ENA for use in manufacture of alcoholic liquors for human consumption from ambit of GST," a statement after the GST Council meeting said.


The Finance Minister also said that rectified spirit for industrial use will have a separate HS code. The GST code will be amended to create a separate category for alcohol that is used for industrial use which will attract an 18 per cent GST tax.

"A separate tariff HS code has been created at 8 digit level in the Customs Tariff Act to cover rectified spirit for industrial use. The GST rate notification will be amended to create an entry for ENA for industrial use attracting 18% GST," a statement said.

The GST Council also decided to reduce the tax rate on molasses from 28 to 5 per cent which would benefit sugarcane farmers as mills would get more money, Sitharaman said.

The cut in the molasses GST will also reduce the cost of making cattle feed, she added.