Gadkari Urges GST Cut on Crude Ethanol to Support Clean Mobility

As India prepares for a major revamp of its Goods and Services Tax (GST) framework, Union Minister for Road Transport and Highways Nitin Gadkari has pitched for a sharp reduction in GST on crude ethanol—from the current 18% to just 5%, according to a report by ToI.

His appeal is rooted in the government’s vision to promote cleaner mobility through greater adoption of flex-fuel vehicles.

Tax Disparity Hindering Flex-Fuel Adoption

Currently, ethanol used in the Ethanol Blended Petrol (EBP) Programme already enjoys a concessional GST rate of 5%. However, crude ethanol, which can be used to run flex-fuel vehicles directly, continues to attract the standard 18% GST. Gadkari believes this discrepancy is a major deterrent to wider consumer acceptance of 100% ethanol-powered vehicles.

Despite over 400 fuel stations in India offering 100% ethanol, uptake has remained lukewarm. According to Gadkari, aligning the tax treatment of crude ethanol with that of blended ethanol would level the playing field and encourage more people to make the switch to greener alternatives.

GST Reform on the Horizon

Gadkari’s recommendation comes at a time when the Union government, led by Finance Minister Nirmala Sitharaman, is actively re-evaluating the structure of GST. The focus is on rationalising tax rates, improving classification clarity, and boosting overall revenue efficiency.

India’s GST system currently has four primary slabs: 5%, 12%, 18%, and 28%. While the 5% slab includes essentials, the 18% category brings in the bulk of tax revenue.

As per news reports, Industry experts and trade bodies have consistently advocated for merging the 12% and 18% brackets into a single mid-range slab—somewhere between 15–16%—to simplify compliance. However, concerns around potential revenue losses and lack of political consensus have so far stalled these efforts.

Previous attempts at reform through two separate Groups of Ministers (GoMs) failed to produce actionable outcomes. A third GoM is now studying critical areas, including the compensation cess, which is scheduled to expire in March next year.

Why This Matters?

Gadkari’s push for a lower GST rate on crude ethanol is timely, as the nation intensifies its focus on cleaner fuel alternatives and energy security. With rising global energy prices and the environmental cost of fossil fuels under scrutiny, easing the tax burden on ethanol could be a strategic move toward long-term sustainability.

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Conclusion

Nitin Gadkari’s call for a 5% GST on crude ethanol could mark a significant shift in India’s clean mobility policy. As discussions around GST rationalisation gain momentum, aligning taxation with environmental goals might just be the kind of policy push needed to mainstream ethanol-based transport. The ball is now in the court of policymakers and states, who will need to weigh revenue goals against long-term sustainability.

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