Gadkari seeks 5% GST on crude ethanol to push flex-fuel cars, warns against petrol parity
As the Centre and states gear up for a major overhaul of India’s Goods and Services Tax (GST) framework, Union Road Transport Minister Nitin Gadkari has called for a reduction in the GST rate on crude ethanol—from the current 18% to 5%—in a bid to support the production and adoption of flex-fuel vehicles, according to a report by ToI.
At present, ethanol that is used under the Ethanol Blended Petrol (EBP) Programme attracts a concessional GST rate of 5%. However, crude ethanol continues to be taxed at the higher rate of 18%. A source told TNN that Gadkari has urged for parity between the two, cautioning that taxing crude ethanol at such a high rate could discourage people from opting for vehicles that run entirely on ethanol.
"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.
Although over 400 fuel outlets in the country currently offer 100% ethanol, consumer interest remains weak. Gadkari believes this trend can be reversed if a more favourable tax policy is introduced for crude ethanol.
Gadkari’s appeal comes as the Union government is in the process of re-evaluating the GST structure. Finance Minister Nirmala Sitharaman and a team of officials are reviewing various rationalisation proposals ahead of detailed consultations with states. The larger exercise aims to streamline the GST regime, enhance revenue efficiency, and address classification issues that have emerged since the tax was introduced in 2017.
