The GST Council meeting headed by Finance Minister Nirmala Sitharaman, held on Saturday, October 7, 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 Union government.

“However, keeping the issue of healthy Centre-state relations in mind it was decided at the 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 GST Council also decided to reduce the tax rate on molasses from 28% to 5% 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 the rectified spirit for industrial use will have a separate Harmonized System (HS) code. HS codes are used to classify export trade goods. The GST code will be amended to create a separate category for alcohol that is used for industrial use which will attract an 18% GST tax.