During the GST Council meeting, presided over by Finance Minister Nirmala Sitharaman, a significant decision was made regarding the taxation of extra neutral alcohol (ENA), a crucial component in the production of consumable alcohol. The Finance Minister clarified that, until now, the states lacked the authority to impose taxes on ENA, with this power resting solely within the jurisdiction of the GST Council and the Central government. Nevertheless, emphasizing the importance of maintaining a harmonious relationship between the Centre and the states, it was agreed during the meeting that this taxing authority would be “ceded to the states.”
ENA is essentially the raw alcohol used in the production of alcoholic beverages. This development signifies a shift in the tax landscape, allowing states more control over the taxation of ENA.
Additionally, the GST Council also took action to reduce the tax rate on molasses from a substantial 28% to a significantly lower 5%. This decision holds considerable implications for sugarcane farmers, as it translates to higher returns for mills, consequently benefiting the agricultural sector. Furthermore, the reduced tax on molasses is expected to have a positive impact on the cost of manufacturing cattle feed.
Finance Minister Sitharaman also noted that a separate Harmonized System (HS) code will be designated for rectified spirit used for industrial purposes. This adjustment in the GST code establishes a distinct category for industrial alcohol, subject to an 18% GST tax rate. These changes reflect a significant development in the taxation policies governing alcohol and its related products in India.
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