PETROL NO GST Excise+VAT LIQUOR NO GST State Excise ELEC NO GST State levy ✗ ✗ GCA GUPTA CHANDAN & ASSOCIATES Professional Firm · New Delhi · Pan India GST…
The Great GST Exclusion – Status June 2026: Eight years after GST implementation, petroleum crude, petrol, diesel, natural gas, aviation turbine fuel (ATF), alcoholic liquor for human consumption, and electricity remain outside GST. On 8 December 2025, the Government of India clarified in Lok Sabha that petroleum products and alcoholic beverages are “presently not proposed to be brought under GST unless recommended by the GST Council.” Finance Minister Nirmala Sitharaman said in September 2025 – “Not in the immediate future.” Yet – businesses operating in these sectors face significant GST compliance obligations on related activities, and the ITC cascade from petroleum exclusion costs industry an estimated ₹1.5-2 lakh crore annually. This guide explains the complete picture — what’s excluded, how it’s taxed, what GST still applies, and the business impact.
1. Constitutional Basis – Why These Products Are Outside GST
The critical distinction – Constitutional exclusion vs. Legislative exclusion:
Alcoholic liquor for human consumption: Constitutionally EXCLUDED from GST itself. Article 366(12A) defines “goods and services tax” as a levy on supply of goods and services other than supply of alcoholic liquor for human consumption. To bring liquor under GST requires a Constitutional Amendment – a two-thirds majority in Parliament plus ratification by at least half the states. This is politically very complex.
Five petroleum products: NOT constitutionally excluded. They are temporarily kept outside GST. Article 279A(5) requires the GST Council to recommend the date from which GST shall be levied on petroleum crude, high speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel. §9(2) CGST Act says GST on these will apply from the date notified by the Government on GST Council’s recommendation. Until such recommendation and notification – they remain outside GST. No constitutional amendment needed – just GST Council consensus.
Electricity: Entry 53 of the State List (Seventh Schedule) gives states exclusive power to levy tax on “consumption or sale of electricity.” GST (a concurrent levy) does not cover electricity supply.
GST Council recommendation → Government notification
High (states’ revenue concerns)
Electricity
State List power (Entry 53)
Constitutional Amendment to move to Concurrent List
Very High
2. Complete List – What is Outside GST in 2026
Item
Outside GST?
Current Tax
Who Taxes It
Alcoholic liquor for human consumption (beer, wine, IMFL, country liquor)
YES – Constitutional
State Excise Duty + State VAT/Sales Tax
State Government exclusively
Petroleum crude
YES – Temporary legislative
Central Excise Duty + Cess
Central Govt (Excise) + State (VAT)
Motor spirit (Petrol/MS)
YES
Central Excise ~₹19.90/L + State VAT (12-38%)
Central + State
High Speed Diesel (HSD)
YES
Central Excise ~₹15.80/L + State VAT (11-25%)
Central + State
Natural Gas
YES
State VAT (varies); some states: no VAT
State Government
Aviation Turbine Fuel (ATF)
YES
Central Excise 11% + State VAT (1-30%)
Central + State
Electricity (supply and distribution)
YES
Electricity Duty/Tax under Electricity Act; state-specific
State Government
Tobacco products (cigarettes, bidis)
Partially – under GST BUT also Central Excise duty continues
GST (40% + compensation cess) + Central Excise (retained)
Both Central Govt
Lottery tickets
Under GST at 40% (SC ruling)
40% GST
Central Govt under GST
Crude petroleum products used as feedstock (plastics, chemicals)
The petroleum product itself is outside GST; the manufactured product is taxable
Manufacturer gets no ITC on crude/naphtha used as input; taxes cascade
Mixed cascade
3. Petroleum Products – Current Tax Structure
Product
Central Excise Rate
State VAT Range
Total Effective Tax
Impact
Petrol
₹19.90 per litre (Road & Infrastructure Cess + Basic Excise)
4% (Andaman) to 38%+ (Rajasthan, MP, Maharashtra)
~40–55% of retail price
Petrol at ₹100/L retail: ₹40–55 is tax
Diesel
₹15.80 per litre
12% (Himachal) to 25%+ (many states)
~35–45% of retail price
Backbone of Indian logistics – high diesel tax = higher freight cost
ATF
11% ad valorem
1% (Gujarat – incentive for aviation) to 29% (UP, others)
~25–40% of airline fuel cost
Aviation fuel costs = 35–45% of Indian airline operating costs; ATF tax major contributor
Natural Gas
No Central Excise (exempted)
Varies widely: 3% to 28% VAT; some states have local levies
3–28% depending on state
CNG vehicles: price varies by state; city gas distribution costs differ dramatically
Petroleum Crude
₹1,600-2,000 per metric tonne cess + basic excise
Limited state VAT at crude stage
Applied at refinery gate
Refineries: no ITC on crude input costs → built into product prices
LPG (cooking gas)
Under GST – 5% GST (domestic; subsidised) / 18% (commercial)
N/A – under GST
5% or 18% GST
LPG WAS included in GST unlike other petroleum – different classification
LPG is INSIDE GST – an important distinction: LPG (Liquefied Petroleum Gas) is NOT one of the five excluded petroleum products. LPG is covered under GST at 5% for domestic supply and 18% for commercial supply. The five excluded petroleum products specifically named in Article 279A(5) are: petroleum crude, high-speed diesel, motor spirit (petrol/MS), natural gas, and ATF. LPG, kerosene, furnace oil, naphtha, and other petroleum derivatives are inside GST.
4. Alcoholic Liquor – State Excise + VAT Framework
Since liquor is constitutionally outside GST, it remains a state subject taxed through: (a) State Excise Duty – the primary levy on production/manufacture of liquor, and (b) State VAT/Sales Tax – on sale to consumers. States also impose various other levies like licence fees, assessment fees, and health cess.
State-wise Liquor Tax Variation (Illustrative – June 2026)
State
Liquor Tax Approach
Estimated Consumer Tax Incidence
Delhi
Excise Policy (revised periodically); state retail; MRP-based excise
60-80% of MRP is tax
Maharashtra
State Excise + VAT; highest excise state in India
50-70% depending on IMFL type
Tamil Nadu
TASMAC monopoly; state government sole retailer; no transparency in “tax” portion
Government markup = significant implicit tax
Goa
Lower excise rates; attracts tourism; cheaper liquor than most states
30–40%
Bihar, Gujarat, Manipur
Prohibition states – liquor banned (exception for some categories in Gujarat)
N/A (prohibition)
Rajasthan, UP
Higher VAT on liquor; state government retail shops
55–75%
Revenue dependence – why states resist GST inclusion of liquor: Excise duty and VAT on liquor contribute 15-25% of total tax revenue for most Indian states. For some states (Andhra Pradesh, Telangana, Tamil Nadu), liquor revenue is close to 20-25% of state’s own tax revenue. Any inclusion in GST would mean revenue sharing with the Centre and loss of state autonomy to set rates – a non-starter politically.
Liquor Licence Requirements – Business Compliance
Every stage of liquor supply (manufacturing, warehousing, wholesale, retail) requires State Excise Department licence
Excise duty is paid at the manufacturing/bonded warehouse stage
Hotels and restaurants require Excise serving licence (Bar licence / Dining Hall licence)
Import of foreign liquor: Custom duty + Additional duty + State excise import fee
Export of liquor: State excise export permission; different rates/procedures
5. Electricity – Why It’s Outside GST
Electricity supply is outside GST due to Entry 53 of the State List which gives states exclusive power to tax “consumption or sale of electricity.” This has not been moved to the Concurrent List (where GST operates), making electricity taxation a purely state matter.
Electricity Activity
GST Position
Tax Applied
Generation of electricity (power plant output)
Outside GST
State Electricity Duty on generation
Transmission services (grid operators)
Outside GST (considered part of electricity supply chain)
State regulatory approved tariffs
Distribution services (DISCOMS)
Outside GST
Electricity tariff (state regulated); electricity duty on consumption
Solar panels/modules for generation
5% GST on equipment
5% GST on panels; but electricity generated is outside GST
Wind turbines, generators
5-18% GST on equipment
GST on purchase; no GST on electricity generated
Smart meters, transformers, cables
18% GST on equipment
GST on procurement of equipment
EPC contracts for power projects
18% GST on works contract
GST on construction/installation services
Consulting/engineering services to power companies
18% GST
GST on services
The electricity ITC cascade for manufacturers: A factory buys electricity at ₹8/unit + electricity duty. It produces taxable goods and charges 18% GST. The electricity duty paid to the state government is a cost that CANNOT be claimed as ITC under GST – it’s outside the GST chain entirely. This means the tax on electricity is embedded in the cost of production and adds to the final price of manufactured goods – a classic cascading tax effect that GST was designed to eliminate but cannot for electricity.
6. The ITC Cascade Problem – How Exclusions Hurt Business
The Broken Credit Chain:
GST’s core promise was to eliminate the “tax on tax” problem (cascading taxes) through seamless ITC. But when key inputs are outside GST – the chain breaks:
Airlines: Pay 11% Central Excise + State VAT on ATF (fuel = 35-45% of costs). These taxes are NOT in GST. Airlines charge 18% GST on tickets. Airlines CANNOT claim ITC for ATF taxes → ATF taxes are embedded costs → higher ticket prices.
Transport/Logistics: Trucker pays diesel excise + VAT (18-25% effective). These are NOT ITC-eligible under GST. Trucker charges 12% GST on freight. Diesel cost is pure cash cost with no credit → higher freight rates.
Power-intensive Industries (cement, aluminium, steel): Pay electricity duty + energy costs outside GST. Cannot claim ITC → energy taxes fully cascade into product prices.
Industry
Excluded Input
Annual ITC Loss (est.)
Consumer Impact
Aviation
ATF (~₹1.5 lakh crore annual spend)
₹15,000–20,000 crore
Higher airfare; uncompetitive vs global airlines
Road transport/logistics
Diesel (~₹7 lakh crore annual consumption)
₹1.2-1.5 lakh crore
Higher freight rates; inflation in manufactured goods
Power/electricity-intensive industry
Electricity duty/tax
₹30,000-50,000 crore
Higher prices for cement, aluminium, steel, paper
Petrochemical/plastic manufacturers
Naphtha, natural gas as feedstock
₹20,000-30,000 crore
Higher plastic/chemical costs
City gas distribution (CNG)
Natural gas
Significant; CNG price includes VAT not creditable
CNG costs embed state taxes; prices vary by city
7. What GST DOES Apply – GST on Activities in These Sectors
While the core products (petroleum, liquor, electricity supply) are outside GST – a wide range of activities, services, and related products in these sectors DO attract GST:
Activity/Product
GST Rate
Notes
Drilling and exploration services for petroleum
18%
Services provided by drilling companies; GST on contracts with oil companies
Pipeline transportation of natural gas / crude
5-18%
Services of pipeline operators; different from the gas itself
Storage of crude oil, petroleum products
18%
Tank farm and terminal services
Refinery EPC / maintenance contracts
18%
Engineering/construction at refineries
Exploration/geological survey services
18%
Geophysical surveys, seismic testing
Insurance on petroleum cargo/assets
18%
Marine and fire insurance on petroleum assets
LPG (liquefied petroleum gas) – domestic
5%
LPG is NOT one of 5 excluded petroleum products; inside GST
Capital equipment inside GST; but ITC cannot be used against state excise output
Restaurant liquor service (when served in restaurant)
Part of restaurant supply rate
See Section 8 – composite supply; 5% or 18% restaurant rate applies on the bill
Electricity generation/transmission equipment (turbines, solar panels)
5% (solar) / 18% (conventional)
Equipment is taxable; electricity itself is not
Smart meters
18%
Meters supplied by DISCOMs under GST
Power generation EPC contracts
18% (works contract for power infra)
Construction and installation
Consulting/legal/IT services to petroleum or power companies
18%
All professional services attract GST regardless of sector
8. GST on Liquor Served in Restaurants and Hotels
The Restaurant GST on Liquor – Composite Supply:
When a restaurant serves liquor along with food as part of its service – the entire supply (food + liquor) is a composite supply of restaurant services. The GST rate for restaurant services applies to the entire bill including the liquor portion. This is one of the few scenarios where liquor effectively attracts GST – indirectly through the restaurant service.
Scenario
GST Treatment
Rate
Restaurant not in a hotel (AC or non-AC)
Composite supply of food and beverages (including liquor) = restaurant service
5% GST (no ITC)
Restaurant in a hotel with room tariff ≥ ₹7,500/night
Composite restaurant service; higher rate since it’s a premium establishment
18% GST (with ITC)
Bar (serving liquor without food)
This is the contentious area – if serving ONLY liquor with no food component, it may not be a “restaurant service”
Complex – state-specific; some states treat bar service as outside GST; courts differ
Hotel minibar / room service with liquor
Part of accommodation service or restaurant service; composite supply
18% GST (part of hotel bill)
Outdoor catering with alcohol
Composite catering service; liquor as part of catering composite supply
18% GST (outdoor catering rate)
Retail sale of packaged liquor (off-licence)
Outside GST – state excise and VAT apply; no GST on bottle sold at shop
0% GST; State excise + VAT
The bar-only establishment dilemma: Many states have litigated whether a standalone bar (serving only liquor, no food) is a “restaurant” for GST purposes. CBIC has issued several clarifications maintaining that restaurants serving liquor should charge GST on the composite supply. However, in some states, standalone bars argue they are outside GST as the primary supply is liquor (outside GST). This remains an area of litigation – consult a GST professional for your specific establishment type.
9. ATF and Aviation – Impact on Airlines
Aviation Turbine Fuel (ATF) represents 35–45% of Indian airline operating costs. With no GST on ATF – airlines face a significant unrecoverable tax burden:
Tax on ATF
Rate
ITC Claimable?
Central Excise Duty on ATF
11% ad valorem
NO – outside GST chain
State VAT on ATF (varies by state)
1% (Gujarat – incentive for hub) to 29% (UP, Kerala)
NO – outside GST chain
GST charged on airline tickets
5% (economy class) / 18% (business class)
Yes – passengers pay GST on ticket; airlines collect but cannot offset ATF taxes
State VAT variation on ATF creates hub competition: Gujarat charges only 1% VAT on ATF – making Ahmedabad and Surat significantly cheaper fuelling points. Maharashtra charges ~26% VAT on ATF. This variation has driven airlines to refuel in Gujarat when possible. If ATF were under GST at a uniform rate (say 18%), this distortion would disappear – uniform ATF costs nationwide. This is a strong argument for bringing ATF under GST first, before other petroleum products.
10. Natural Gas – Special Considerations
Natural gas is one of the five excluded petroleum products despite its clean energy credentials and widespread industrial use. Natural gas taxes vary dramatically by state:
City Gas Distribution (CGD): Natural gas distributed as piped natural gas (PNG) for homes and CNG for vehicles is outside GST; state VAT applies. But the distribution infrastructure (pipes, compressors, meters) procured by CGD companies IS under GST – creating a partial ITC mismatch.
Industrial gas use: Factories using natural gas as fuel or feedstock (petrochemicals, fertilisers, glass, ceramics) pay state VAT on gas input but charge GST on their output – the gas VAT cannot be offset against GST → cascading tax
Fertiliser industry: Natural gas is the primary feedstock for urea. High gas taxes increase fertiliser production costs → subsidies needed → government fiscal burden
Power generation: Gas-based power plants pay state VAT on gas; electricity they produce is outside GST – double exclusion with no credit chain
The case for Natural Gas first: Within the five excluded petroleum products, natural gas is considered the most “GST-ready” by industry and economists. It has a clean supply chain, limited number of industrial buyers, and its inclusion would benefit fertiliser, power, and manufacturing sectors significantly. Several industry bodies have petitioned the GST Council to include natural gas in GST on priority. The 56th GST Council (September 2025) discussed but did not recommend inclusion – the issue remains on future agendas.
11. Industrial Alcohol vs Alcoholic Liquor for Human Consumption
Critical Distinction: “Alcoholic liquor for human consumption” is outside GST. But “industrial alcohol” (denatured spirit, rectified spirit used as feedstock, solvent, for fuel blending) IS inside GST.
Product
GST Status
Rate
Notes
Beer, wine, whisky, rum, vodka, gin (sold for drinking)
OUTSIDE GST
State Excise + VAT
Constitutional exclusion
Extra Neutral Alcohol (ENA) – used as liquor base
OUTSIDE GST
State Excise
Courts have held ENA used for liquor manufacture is “for human consumption” – state excise
Cannot be consumed; used in pharma, perfumes, industrial cleaning
Ethanol for fuel blending (petrol-ethanol blend)
INSIDE GST
5% GST (Notification 1/2017)
Used for E10/E20 fuel blending; GST applies on supply of ethanol
Ethanol for pharma/chemical use
INSIDE GST
18% GST
Industrial use = inside GST
Molasses (byproduct; used in distilleries)
INSIDE GST
5% GST
GST applies on supply of molasses by sugar mills
ENA classification controversy: Whether Extra Neutral Alcohol (the base spirit used to make IMFL) is “alcoholic liquor for human consumption” or “industrial alcohol” has been litigated extensively. The Supreme Court in multiple cases has held that ENA intended to be used in liquor manufacture is governed by state excise – not GST. However, ENA sold for non-liquor industrial use (pharma, chemicals) is inside GST at 18%. Distilleries must carefully classify their ENA supply based on the buyer’s end-use to determine correct tax treatment.
12. Arguments For and Against GST Inclusion
For GST Inclusion
Against GST Inclusion
Eliminate cascading taxes – ITC chain seamless from crude to consumer goods
States lose major revenue source (30-40% of state tax revenue for petroleum and liquor)
Uniform prices across India – no inter-state price arbitrage for petrol/diesel
Revenue neutrality is extremely complex – states with high VAT (Maharashtra, Rajasthan) would need high compensation
Lower input costs for aviation, logistics, manufacturing – lower prices for consumers
Central government also loses significant excise revenue (13% of Central tax revenue from petroleum)
ATF under GST would make Indian aviation more competitive globally
Political sensitivity – petrol prices directly affect voters; any mismanagement of rate-setting = political cost
GST rate-setting could be more transparent than current discretionary excise adjustments
For liquor – Constitutional amendment required; practically impossible in near term
India’s WTO commitments and trade competitiveness improve with seamless credit
GST Council consensus is very hard – all states must agree; single dissenting state can block
13. Future Outlook – Will Petroleum and Liquor Come Under GST?
Official Position – June 2026:
8 December 2025, Lok Sabha: Government confirmed petroleum and alcoholic beverages “presently not proposed to be brought under GST unless recommended by the GST Council”
September 2025, FM Nirmala Sitharaman: “The current proposal does not include it… Not in the immediate future”
56th GST Council (September 2025): Discussed but did not recommend petroleum inclusion
GST 2.0 reforms: Focus on 3-slab rationalisation and rate simplification – petroleum/liquor not in immediate scope
Scenario
Likelihood (2026-2030)
What Could Change It
ATF under GST (aviation fuel)
Moderate – most likely first step
Strong aviation industry lobbying; airline sector pressures
Natural Gas under GST
Moderate-Low
Industry + fertiliser sector pressure; clean energy transition incentives
Petrol/Diesel under GST
Very Low near-term
Requires multiple state consensus; post-election timing; major revenue restructuring needed
Alcoholic liquor under GST
Near-impossible (Constitutional)
Constitutional amendment; practically no political will
Electricity under GST
Very Low
Constitutional amendment to move Entry 53 to Concurrent List; states strongly oppose
14. Business Impact and Compliance Guidance
For Businesses Using Petroleum/Electricity as Inputs
Cascade cost accepted as reality: Petroleum/electricity taxes are a true cost of production – book as expense (deductible for income tax under §34 ITA 2025 (§37 ITA 1961); not ITC eligible
State VAT input tax credit: Under old VAT laws (before GST), some states allowed VAT credit on petroleum used as input for manufacturing. These transitional credits may still be in dispute — resolve with state VAT authorities
Cost modelling: Build petroleum/electricity taxes into product pricing; conduct break-even analysis to check competitiveness. Bring ATF/diesel costs as direct costs in management accounts
Location decisions: For energy-intensive businesses, state-level electricity duty and state VAT on natural gas should factor into location decisions (states like Gujarat actively reduce energy taxes for industrial investment)
For Liquor Businesses
Maintain separate accounts for state excise and GST obligations – they are entirely separate compliance streams
GST registration mandatory if making any taxable supplies (including restaurant food + liquor composite; industrial alcohol supply; equipment purchase/sale)
ITC on inputs (sugar, malt, packaging, equipment) used in liquor manufacturing: blocked – cannot offset against state excise output; claim as expense in income tax
Restaurant operators: 5% GST on food + liquor composite (no ITC); or 18% with ITC for large hotel restaurants
Export of liquor: State excise process + Customs; GST on related services (shipping, insurance, freight)
15. Frequently Asked Questions
Q1. Why is petrol not under GST when all other goods are?
Petrol (motor spirit) is temporarily excluded from GST under Article 279A(5) of the Constitution. It can be brought under GST through a GST Council recommendation followed by government notification – no constitutional amendment needed. However, the GST Council has not made this recommendation as of June 2026. The reason: petrol is a massive revenue source for both Central Government (Central Excise Duty) and State Governments (State VAT). Central excise on petroleum = ~13% of Centre’s tax revenue. State VAT on petroleum = ~20-30% of many states’ total tax revenue. Any rational GST rate on petrol (say 40% – the highest slab for “demerit” goods) would reduce revenues for most states currently taxing at 40-55% combined rates. Revenue neutrality would require states to receive compensation, triggering complex fiscal negotiations. The Finance Minister confirmed in September 2025 that inclusion is “not in the immediate future.”
Q2. My restaurant serves food and alcohol. How do I charge GST?
Your restaurant supply (food + liquor served) is a composite supply where restaurant service is the principal supply. GST applies to the entire bill – food and liquor together – at the restaurant service rate: (a) 5% GST (without ITC) for standalone restaurants and restaurants in hotels with tariff below ₹7,500/night; (b) 18% GST (with ITC) for restaurants in hotels with room tariff ≥₹7,500/night. The liquor portion does NOT separately attract state excise when served in a restaurant – state excise has already been paid at the manufacturing/wholesale stage. Your restaurant pays state excise/licence fees for the Bar licence; the consumer-facing charge is covered by GST on the composite restaurant supply. Ensure you have: valid GST registration, valid Bar/Serving Licence from State Excise, and correctly structured invoices showing GST on the total food+beverage bill.
Q3. Can airlines claim ITC on ATF (Aviation Turbine Fuel)?
No – Airlines CANNOT claim ITC on ATF. ATF is one of the five excluded petroleum products outside GST. Airlines pay Central Excise (11%) + State VAT (1-29% depending on state) on ATF – these are outside the GST chain entirely. Airlines charge 5% GST on economy tickets and 18% on business class. The ATF tax is a pure cash cost embedded in airline operating costs with no credit available. This is the “broken credit chain” problem. On a ₹10,000 ticket: airline pays ~₹3,500-4,500 on ATF (of which ~₹700-1,200 is ATF tax); passenger pays ₹500 GST; the airline can use the ₹500 GST for input procurement, but the ₹700-1,200 ATF tax is a completely unrecoverable dead cost. India’s airlines have collectively petitioned for ATF under GST for years – it would significantly reduce ticket prices and improve competitiveness with foreign carriers who face GST-equivalent credits in their home countries.
Q4. Is extra neutral alcohol (ENA) used to make whisky covered under GST?
This is a heavily litigated question. The Supreme Court and various High Courts have held that ENA (Extra Neutral Alcohol) that is specifically manufactured/procured for use in the production of IMFL (Indian Made Foreign Liquor – whisky, rum, vodka) is effectively “alcoholic liquor for human consumption” even though it needs further processing. As such, it falls under state excise jurisdiction – not GST. However, ENA sold to pharma companies for use as solvent/reagent (not for human consumption) is inside GST at 18%. The key test: end-use. ENA → liquor manufacture = state excise. ENA → industrial/pharma use = 18% GST. Distilleries must carefully invoice based on the buyer’s stated end-use. Misclassification creates risk from either state excise authorities (if GST-invoiced for liquor use) or GST authorities (if ENA charged as non-GST for industrial buyer).
GST & Excise Compliance for Petroleum, Liquor & Energy Sectors – GCA
GCA provides compliance advisory for businesses in petroleum, liquor, and energy sectors – GST compliance on taxable activities within these sectors, State Excise audit support for liquor businesses, restaurant GST on food+liquor composite supply, ITC maximization on allowable inputs, income tax treatment of non-creditable energy taxes, and strategic advice on location/structuring decisions considering state-level energy tax variations. Pan-India, 100% digital.
Disclaimer: Educational purposes only. Based on CGST Act 2017, Constitution of India (Article 366(12A), Article 279A, Entry 51/53/54 of State List), Central Excise Act 1944, as available up to June 2026. Government position on petroleum/alcohol inclusion: Lok Sabha clarification 8 December 2025 (Shri Pankaj Chaudhary, MoS Finance); FM Nirmala Sitharaman statement September 6, 2025; 56th GST Council deliberations (September 2025). Central Excise rates on petrol (~₹19.90/L) and diesel (~₹15.80/L) as per last formal revision; subject to change by government notification. State VAT rates illustrative and subject to state-level revisions. Restaurant GST on liquor as composite supply confirmed from CBIC FAQs and circulars. ENA classification controversy: SC positions through 2025. ATF state VAT variation from IATA India data (2025). ITC cascade loss estimates from industry bodies (CII, FICCI) and ICRIER research. Consult a qualified GST/Excise practitioner for specific industry/transaction advice.
Table of Contents
Revenue dependence – why states resist GST inclusion of liquor: Excise duty and VAT on liquor contribute 15-25% of total tax revenue for most Indian states. For some states (Andhra Pradesh, Telangana, Tamil Nadu), liquor revenue is close to 20-25% of state’s own tax revenue. Any inclusion in GST would mean revenue sharing with the Centre and loss of state autonomy to set rates – a non-starter politically.
The case for Natural Gas first: Within the five excluded petroleum products, natural gas is considered the most “GST-ready” by industry and economists. It has a clean supply chain, limited number of industrial buyers, and its inclusion would benefit fertiliser, power, and manufacturing sectors significantly. Several industry bodies have petitioned the GST Council to include natural gas in GST on priority. The 56th GST Council (September 2025) discussed but did not recommend inclusion – the issue remains on future agendas.
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