Minister Nitin Gadkari Seeks Reduction Of GST On Crude Ethanol: Report

As the Centre and states discuss rationalising the Goods and Services Tax (GST) framework in the country, the Union Minister of Road Transport and Highways has suggested reducing the GST rate on crude ethanol. Currently, ethanol used under the Ethanol Blended Programme (EBP) attracts a concessional GST rate of 5 per cent, while crude ethanol attracts a GST rate of 18 per cent. The minister has urged to reduce the current GST rate on the latter to 5 per cent. 

Gadkari has argued that the higher taxation on crude ethanol is dampening its demand. Despite 400 fuel outlets offering 100 per cent ethanol, consumer uptake remains significantly low, and this can be reversed with a more favourable tax structure. 

Gadkari’s input comes as Finance Minister Nirmala Sitharaman, along with a team of officials, is working on rationalising the country’s GST structure. The primary objective is to simplify the GST regime and enhance revenue efficiency. The restructuring also aims to address classification challenges that have emerged since its rollout in 2017. 

The current GST system comprises four slabs: 5%, 12%, 18%, and 28%. While most items are taxed under the 5 per cent slab, the bulk of the tax collection comes from the 18 per cent category. Gadkari’s suggestion to lower the GST on crude ethanol highlights India’s broader energy and mobility goals. What remains to be seen is whether the finance ministry will rejig the GST structure as per the minister’s request.