As the Centre and states deliberate on rationalising the Goods and Services Tax (GST) structure, Union Minister Nitin Gadkari has proposed reducing the GST on crude ethanol from 18% to 5%, reported Times of India citing sources. The move aims to encourage the production and adoption of flex-fuel vehicles.
Currently, ethanol used for blending with petrol under the Ethanol Blended Petrol (EBP) Programme is taxed at 5%. Gadkari is said to have called for aligning the GST rate on crude ethanol with that of the ethanol used for blending, to ensure price competitiveness. At present, around 400 fuel stations in the country offer 100% ethanol, but consumer uptake remains low. “Why would people opt for these vehicles if crude ethanol is priced the same or higher than petrol? That’s why a GST reduction is necessary,” a source stated, according to the Times of India.
A news report by The Times of India say that at least two groups of ministers, comprising representatives from the states, were set up, but the suggestions made by them were not seen to be complete. A third group of ministers is tackling the issue of cesses as the compensation cess is due to end in March.
India’s ethanol production capacity has witnessed a surge under the Modi government, increasing more than fourfold over the last 11 years to reach 1,810 crore litres annually, driven by supportive policy measures. Out of the total 1,810 crore litres of installed capacity, 816 crore litres are molasses-based, 136 crore litres are dual-feed capacity, and 858 crore litres come from grain-based production.
Over the past 11 years, sugar mills/distilleries, including grain-based facilities, have generated nearly Rs. 2 lakh crore in revenue, with Rs. 1.22 lakh crore coming solely from sugarcane-based distilleries.
