The Goods and Services Tax (GST) Council is set to discuss a proposal to write off past tax dues on extra neutral alcohol (ENA) at its meeting in Delhi on September 9.

ENA, a high-purity alcohol distillate, has been at the center of tax disputes since the GST’s implementation in 2017.

Discrepancies in ENA’s taxation across states, including VAT, GST or no tax, have led to confusion and financial strain for liquor producers.

The council previously agreed to exclude ENA from the GST when used for alcoholic beverage production, allowing states to levy their own taxes.

The proposed write-off aims to streamline the taxation process, resolve past cases, and reduce the compliance burden on the industry.

“The council’s decision will be crucial in clarifying ENA’s tax treatment and providing relief to producers,” said an official.

Budget 2024 removed ENA from the scope of central GST law, clarifying that no GST will be applicable on un-denatured ENA or rectified spirit used for alcoholic liquor production.

However, ongoing litigation and varying tax practices across states have created confusion and demands for both GST and VAT.

Industry experts, including Rajat Mohan of Moore Singhi and Vinod Giri of the Brewers Association of India, have called for resolution to the issue.

“Pursuant to the Finance (No. 2) Act, 2024, the government has clarified that, effective from a date yet to be notified, no GST will be applicable on un-denatured extra neutral alcohol (ENA) or rectified spirit when used for the manufacture of alcoholic liquor for human consumption,” said Mohan.

“However, the issue of ongoing litigation since 2017 concerning this matter remains unresolved.”

Giri echoed Mohan’s concerns, stating that the GST Council should consider writing off past tax dues and adopting an “as is, where is” approach to settlement.