Gadkari seeks GST cut on crude ethanol to boost flex-fuel vehicle adoption
New Delhi: As the Centre and states deliberate on overhauling India's Goods and Services Tax (GST) framework, Union Road Transport Minister
Nitin Gadkari
has urged a reduction in
GST on crude ethanol
—from the current 18per cent to 5 per cent—to encourage the production and uptake of
flex-fuel vehicles
, reports TNN.
Currently, ethanol used under the
Ethanol Blended Petrol
(EBP) Programme attracts a concessional GST rate of 5per cent, but crude ethanol continues to be taxed at 18per cent. A source told TNN, Gadkari has pushed for rate parity between the two, warning that higher taxation on crude ethanol could dampen demand for 100per cent ethanol-powered vehicles. 'Why will people go for these vehicles if the price of crude ethanol is equal to or more than that of petrol?' the source quoted Gadkari as saying.
Despite over 400 fuel outlets offering 100per cent ethanol, consumer uptake remains low—something the minister believes can be reversed with a more favourable tax structure.
Why is it important
Gadkari's intervention comes at a time when the government is undertaking a comprehensive review of the GST structure. Finance Minister Nirmala Sitharaman, along with a team of officials, is examining rationalisation proposals ahead of formal discussions with states. The broader effort aims to simplify the GST regime, improve revenue efficiency, and address classification challenges that have emerged since its rollout in 2017.
While earlier attempts by two Groups of Ministers (GoMs) failed to yield actionable consensus, a third GoM is now evaluating the issue of cesses—especially the compensation cess, which is slated to expire in March next year.
The current GST system comprises four major slabs—5per cent, 12per cent, 18per cent, and 28per cent. While most items are taxed at 5per cent, the bulk of tax collections arise from the 18per cent category. Industry groups have long advocated rationalisation, especially consolidation of the 12per cent and 18per cent slabs into a single rate of 15-16per cent, although such a move could trigger both revenue losses and political resistance, particularly from states.
Gadkari's suggestion to lower the
GST on crude ethanol
dovetails with India's broader energy and mobility goals, including reducing oil imports and promoting alternative fuels. It remains to be seen whether this proposal will be factored into the final GST rejig currently under review.
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