GST Council's Landmark Decision on Alcohol Taxation in India

 

GST Council's Landmark Decision on Alcohol Taxation in India

During the latest GST Council Meeting, a crucial decision was reached concerning alcohol taxation in India. The decision explicitly states that state governments have exclusive jurisdiction over alcohol for human consumption, exempting it from the Goods and Services Tax (GST).

JK Arora, Chairman of Som Distilleries, welcomed this decision, highlighting that the Indian Constitution clearly assigns authority to states for liquor manufacturing, storage, transportation, and licensing. 

Consequently, the GST Council lacks the legal mandate to impose taxes on consumable alcohol. Arora has consistently advocated for this stance, asserting that the GST Council's attempts to tax alcohol violated the constitutional framework.

Arora's optimism stems from the belief that this clarification will resolve numerous ongoing legal disputes surrounding alcohol taxation, bringing closure to many outstanding issues.

However, it's essential to note that the GST Council decided to maintain GST on extra neutral alcohol (ENA) for industrial purposes. Finance Minister Nirmala Sitharaman cited an Allahabad High Court ruling, stating that the authority to tax ENA rested with the Centre and the GST Council. 

Despite this ruling, the GST Council granted states the autonomy to decide whether to impose taxes on ENA, promoting cooperative federalism and flexibility in aligning with their specific needs and priorities.

In summary, the recent GST Council clarification on taxing alcohol intended for human consumption is a significant step toward resolving longstanding issues and ensuring compliance with the constitutional division of powers between India's central and state governments.