Road Transport Minister Seeks 5% GST on Crude Ethanol to Boost Flex-Fuel Vehicles

Union Road Transport Minister Nitin Gadkari has proposed reducing the GST rate on crude ethanol from 18% to 5% to encourage the production and adoption of flex-fuel vehicles in India. Currently, ethanol used under the Ethanol Blended Petrol (EBP) Programme enjoys a concessional GST rate of 5%, while crude ethanol is taxed at 18%, which Gadkari argues discourages consumers from choosing ethanol-powered vehicles. Despite over 400 fuel outlets offering 100% ethanol, consumer uptake remains low, a trend Gadkari believes can be reversed with a more favorable tax policy. This proposal comes amid a comprehensive review of the GST framework by Finance Minister Nirmala Sitharaman and officials, aiming to simplify the regime, improve revenue efficiency, and resolve classification issues. Previous efforts by Groups of Ministers to rationalize GST slabs have not yielded consensus, and a third group is currently examining cesses, including the compensation cess set to expire next year. The current GST system includes four main slabs—5%, 12%, 18%, and 28%—with the majority of revenue coming from the 18% slab, despite most items being taxed at 5%, prompting calls for rationalization.