The Goods and Services Tax (GST) Commission’s recommendation to cede the rights of taxation on industrial ethyl alcohol to the states would help deter unscrupulous traders from mis-declaring Extra Neutral Alcohol (ENA) for laboratory use, according to Customs officials.
Often by mis-declaring, the importers evade customs duty worth crores. Ethyl alcohol or ENA in its purest form is levied different tariffs based on its usage. If imported for industrial use, the product attracts a 150% customs duty in addition to an 18% GST. Some traders were found to be selling the product to distilleries for making liquor or pharmaceutical companies making substandard medicines. Last month, Mumbai customs caught several importers of ethyl alcohol wrongly categorising it for laboratory use and seized goods worth ₹95 lakh.
An official from the excise department said that ethyl alcohol imported for industrial and commercial purposes will have 28% GST levied against it. “Earlier, the central government wanted to keep all kinds of alcohol imports taxed under the central GST. However, they do not have machinery within states to keep an eye on the misuse of imported ethyl alcohol. Therefore, several state governments opposed this move, some even moved to court,” said the official. Since it has been debated so much, the centre ceded the rights to the states on industrial ethyl alcohol also, he added.
“It is very easy to dilute it (ethyl alcohol) to consume as alcohol, or even to sell alcohol without any licenses. So, the importers not just save themselves from customs duties, but also the control of state duties like licensing fee and other charges,” he said. Now that the tax structure is clearer, the officer feels the next step is price control of the product and properly overseeing its distribution to its correct purpose of import.
The recommendation of the GST commission will now be reviewed by a committee that will bring in suitable laws for the same.
The industry bodies in the alcohol and beverages sector, including the International Spirits and Wines Association of India (ISWAI) welcomed the decision saying that it is a culmination of 6.5 years of advocacy efforts put in by its member companies. They have been working towards this since the establishment of GST in 2017.
Meanwhile, the consignments of the three companies that were found guilty of the above charges were kept on hold by the preventive unit of revenue and intelligence. “We kept calling them questioning, but they didn’t even respect our summons. We were told not to use the coercive punitive sections under the Customs Act on them until the statements are taken, so the case is yet to reach its logical conclusion,” informed a Customs official.
No search of office premises of the involved company or arrest has taken place in the case which uncovered more than ₹20 crore theft of customs duty. One of them, K Raj and Company filed a writ petition in the Bombay high court (HC) earlier this month asking for the provisional release of goods, despite not requesting proper officers of customs to check on their consignment. Sources from the department say despite this, the proprietor of the company, Manohar Tolani, was found visiting higher officials of the customs department, even on the day of submission of the said petition.