India's GST Council to mull exempting distilled alcohol used to make liquor from tax - source

NEW DELHI (Reuters) - India's Goods and Services Tax (GST) Council will discuss exempting distilled alcohol used to manufacture liquor from the indirect tax at its meeting on Oct. 7, according to a source.

High distilled or extra neutral alcohol contains 95% alcohol by volume and is used for producing liquor and for industrial purposes.

The council, chaired by the federal finance minister and includes state finance ministers, will also consider a proposal to lower GST on molasses to 5% from 28%, according to the source.

Molasses, a byproduct of sugar production, is used to make extra neutral alcohol and ethanol.

The reduction in GST on molasses will benefit the sugar industry, Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories Ltd, said.

"Especially those sugar mills that don't have distilleries and sell molasses."

India does not impose GST on liquor.

However, states adopt different practices while imposing GST on extra neutral alcohol, which is key input used to produce liquor.

According to the proposal, grain and molasses-based extra neutral alcohol used for manufacturing liquor will be exempted from GST for an "interim" period, the source said.

States which levy value added tax (VAT) on grain and molasses-based extra neutral alcohol used in industry may be asked to stop levying the VAT, according to the source.

(Reporting by Nikunj Ohri and Rajendra Jadhav; Editing by Mrigank Dhaniwala)

By Nikunj Ohri and Rajendra Jadhav