Gadkari Seeks 5% GST on Crude Ethanol to Boost Flex-Fuel Vehicles

• Gadkari urges slashing GST on crude ethanol from 18% to 5%
• Previous reform panels failed; the new GoM reviews the cess issues
• Ethanol tax cut could align with India's oil import reduction goals

While India is preparing for a vast renovation of its Goods and Services Tax System (GST), Nitin Gadkari, the Union Minister for Road Transport and Highways, made a new argument to reduce the GST on Gross Ethanol from 18 to 5 percent. The measure can accelerate the adoption of flexible vehicles and support the clean energy transition in India. 

While more than 400 gas stations across the country now provide 100 percent ethanol, consumer absorption has remained warm. Gadkari believes that a more favorable tax regime could provide the necessary impulse to demand. His proposal arrives at a crucial moment, with Finance Minister Nirmala Sitharaman leading an initiative to rationalize the GST structure. Currently, employees are reviewing several proposals designed to simplify tax slabs, increase efficiency, and address classification inconsistencies that have emerged since the GST was launched in 2017. 

The previous efforts of two separate ministers (Goms) to achieve consensus on GST reforms failed to gain traction. A third GOM is now reviewing the controversial edition of the cease, particularly the remuneration CESS, scheduled to expire in March next year. The GST regime of India is currently divided into four main slabs, 5, 12, 18, and 28 percent, with most revenue from the 18 percent category. 

Also Read: Ethanol Capacity Soars 4X to 1,810 Cr Litres in Modi Govt's 11 Years

Sector groups are consistently pressured by simplification, including the potential fusion of 12 and 18 percent stands in a unified 15 to 16 percent slab. However, these changes may lead to cautious revenue and resistance deficits with tax impacts. Gadkari's call to relieve the tax burden on Gross Ethanol aligns with broader national goals to reduce oil imports and promote alternative fuels. Whether this recommendation will be incorporated into the next GST Reforms remains to be seen. 

“India spends Rs. 22 lakh crore annually on fossil fuels, and 50 percent of this can be replaced by bioenergy in the next five years,” stated Union Minister Nitin Gadkari in a recent update. His remarks reinforce the government’s commitment to sustainable energy alternatives and highlight the growing potential of bioenergy in reducing fossil fuel dependence.