52nd GST Council could reduce GST on Molasses from 28% to 5%, as per sources

In a bid to give clarity to liquor industry, the upcoming fifty-second GST Council is likely to consider reducing GST on Molasses from 28% to 5%, sources told CNBC-TV18.

"The proposal is under consideration keeping in mind that the council in past could not clarify regarding taxation of ENA (Extra Neutral Alcohol)," sources said.

GST Council, which is scheduled to meet on October 7, is likely to clarify that it has no intent to tax ENA used for manufacturing of alcoholic liquors for human consumption, sources added.

"Council is likely to exempt ENA, both Grain-based and Molasses-based ENA, from GST when supplied for manufacture of alcoholic liquors as alcohol continues to be outside GST and States have the right to collect taxes from alcohol. Noting this, council is likely to request states to exempt ENA — both Grain-based and Molasses-based ENA from VAT when supplied for industrial purposes," sources added.

As of now, ENA supplied for industrial purpose attracts 18% GST and it is clear that taxation of ENA for human consumption continues to be with states and is not under GST.

“The need to come up with such a clarity and proposal came to the fore as there are several practices across states, in some states distilleries are paying GST on ENA and not paying VAT while some distilleries are paying VAT on ENA and not paying GST. This is leading to the confusion for trade and industry," sources added.

"Not just this, there are also some distilleries paying GST at 18% on ENA cleared for manufacture of ‘liquor for human consumption', but not paying any GST on Grain Neutral Spirits (GNS) when supplying to an alcohol bottling unit," sources said.

Thus, the Council secretariat has decided to consider coming up with taxation clarity as there are multiple litigations pending in various judicial forums and centre wants to settle them, sources added.

In this regard, the Council secretariat has proposed to issue clarity as "litigation is a time-consuming process and certainty must be provided to the industry for ease of doing business", sources said.