New Delhi: Liquor is one of the major sources of revenue for Indian government. In India, states are empowered to levy VAT on alcohol for human consumption which roughly makes liquor a quarter of their revenues. The revenue that liquor generates for states is the precise reason why alcohol for human consumption has been consciously reserved out of GST. However, it is only alcohol for human consumption that has been kept out of GST and not every kind of alcohol, CA Tushar Aggarwal – Founder Partner, Tattvam Advisors said.
However, recently the Allahabad High Court quashed the notification issued by the Uttar Pradesh government to levy tax on sale of ENA and stated that rectified spirits or ENA are not alcoholic liquors not fit for human consumption and there is no material to the contrary view. Therefore, states are not empowered to levy any duty on such goods. Thus, the judiciary upheld the view that GST should be applicable on ENA/Rectified Spirit.
In fact, the constitutional bench of the Supreme Court while examining the meaning of the term ‘alcoholic liquors for human consumption’ in Pre GST Regime has held that the law makers used this term with a clear intention to only refer the alcohol which can be used for human consumption and not anything else. Further, in the same judgment they rejected the contention that there are many denatured spirits which can be used for human consumption after appropriate or application or admixture with water or with others. The Court pointed that alcoholic liquors must be understood as these are, not what these are capable of or able to become.
This judgment was further appreciated and regarded by the Supreme Court in its latter judgments where it has been constantly held that State cannot levy excise duty on the raw material or input used for production of alcohol for human consumption, but only on the final product.
Even, the Attorney-General after deliberating upon law and existing judicial decisions, opined that ENA typically contains 95 per cent alcohol by volume and as such is not fit for human consumption. As per Indian Constitution, GST cannot be levied on the supply of alcoholic liquor for human consumption only. However, since ENA and spirits are not fit for human consumption, GST can be levied upon it.
Thought, the Allahabad High Court has reaffirmed the position taken by various courts before GST regime, however, the problem still persists from the standpoint of the government, which is yet to give any clarity on the issue despite the advice of their own man. It is expected that GST Council should come with a legal clarification on this matter to stop the different practices being adopted by the taxpayers.
(Writer is CA Tushar Aggarwal – Founder Partner, Tattvam Advisors.)
For breaking news and live news updates, like us on Facebook or follow us on Twitter and Instagram. Read more on Latest Business News on India.com.