India’s Goods and Services Tax (GST) Council will discuss whether distilled alcohol used for liquor production can be exempted from the indirect tax at its meeting on October 7, a source said.
Highly distilled or extra neutral alcohol contains 95% alcohol by volume and is used for the production of spirits and for industrial purposes.
The council, which is chaired by the federal Minister of Finance and also includes the finance ministers of the states, will also consider a proposal to reduce the GST on molasses from 28% to 5%, according to the source.
Molasses, a byproduct of sugar production, is used to make extra neutral alcohol and ethanol.
The reduction in GST on molasses will benefit the sugar industry, said Prakash Naiknavare, director of National Federation of Cooperative Sugar Factories Ltd. (National Federation of Cooperative Sugar Mills).
“Especially the sugar mills that don’t have distilleries and sell molasses.”
India does not impose GST on liquor.
However, states have different practices in levying GST on extra neutral alcohol, an important input for liquor production.
Under the proposal, extra neutral grain and molasses-based alcohol, used for liquor production, will be exempt from GST for a “transitional period”, the source said.
States that levy VAT on additional neutral grain and molasses-based alcohol used in the industry may be asked to stop levying VAT, the source said.