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

The GST Council meeting headed by Finance Minister Nirmala Sitharaman on Saturday decided to give the states a free hand to levy tax on extra neutral alcohol (ENA) which is used to make alcohol for human consumption.

Addressing a press conference after the GST Council meeting, the Finance Minister explained. That the Allahabad High Court had ruled that the states had no power to impose tax on ENA and. This was solely in the domain of the GST Council and the Centre. 

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 explained.  

ENA is the raw alcohol that is used to make alcohol for human consumption.

The Goods and Services Tax is a successor to VAT used in India on the supply of goods and services. GST is a digitalized form of VAT where you can also track the goods & services. Both VAT and GST have the same taxation slabs.

The GST 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.

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.

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