ENA is a key input to alcoholic beverages. According to industry sources, production of one case of Indian Made Foreign Liquor (IMFL) with 12 bottles of 750 ml each or a total of nine litres, needs four litres of ENA. The alcohol content in IMFL is uniform at 42.8 per cent. For India Made Indian Liquor (IMIL), alcohol ranges between 30 per cent and 36 per cent means less requirement of ENA.

GST Council recommendation came after Allahabad High Court’s ruling in Jain Distillery Private Limited vs Government of UP and similar petitions held: “It is declared, the State lost its legislative competence to enact laws, to impose tax on sales of ENA, upon the enactment of the 101st Constitution Amendment. Consequently, and upon considering Section 174(1)(i) of UPGST Act, 2017, the impugned Notification dated December 17, 2019, insofar as it seeks to impose UPVAT on ENA, Rectified Spirit and SDS, is ultra vires, both on account of lack of (i) legislative competence and (ii) valid delegation. It is therefore quashed.”

Aggrieved by this ruling, State Government moved the Supreme Court which is expected to take up this matter next month. Sources in the industry said that since the High Court ruling not quashed, GST is being levied at 18 per cent (9 per cent in SGST and 9 per cent CGST) in UP while in some States VAT is being levied at different rates.

Now industry is hoping for detailed mechanism based on amendment in law for exclusion of ENA used in manufacturing alcoholic liquor for human consumption from GST. They also expect that mechanism will suggest there will be no additional liability or compliance irrespective of one has paid VAT or one has paid GST. They are hopeful that SC will dispose the petition based on proposed mechanism.

Source: The Hindu Business Line