In a bid to boost the manufacturing of products such as paints, cosmetics, sanitisers, and other pharmaceutical items, the industry has approached the Gujarat High Court, seeking intervention to correct rates and restore pre-GST levels on denatured ethyl alcohol. The industry is also requesting relief from enforcement recovery or action.

According to sources, the industry has simultaneously approached the government, seeking similar relief and rate correction.

According to the industry, the taxability of denatured ethyl alcohol (ethanol) was set at a concessional Basic Customs Duty (BCD) rate of 2.5% in the pre-GST regime. However, with the introduction of GST, the commodity now attracts a higher rate of 5%.

“The industry has consistently argued that the concessional rate is essential to incentivise domestic manufacturing, aligning with the government’s broader ‘Make in India’ initiative and fostering economic growth. It has submitted a detailed representation to the government,” said sources in the know of the development.

Before GST was implemented, the government had reduced the BCD on denatured ethyl alcohol imported for producing excisable goods. However, the high GST rates on denatured ethanol, widely used in manufacturing products such as nail polish, sanitisers, paints, and other industrial items, have added a significant burden to the industry.

Even post-GST, the concessional BCD rate for this product remained unchanged. The GST schedules still state that the concessional rates apply only to excisable goods. Under GST, however, only five products fall under the category of excisable goods, raising a critical question: How can imports of denatured ethyl alcohol be intended for the production of excisable goods when the scope of such goods has been significantly reduced under GST? This issue has now been flagged by the industry, sources added.

Source : CNBC TV18