The government has exempted excise duty on 30% ethanol component in blended petrol, which, according to experts, will proportionately reduce India’s energy imports and may also improve the margins of stressed fuel retailers as oil companies cannot pass on the benefits to the consumer.
According to the Finance Ministry’s notification related to central excise duty on June 10, which contained four orders exempting various elements of the levy, the current exemption is applicable for four variants of ethanol-blended petrol (EBP) – 78% petrol (or E22), 22% ethanol with 25% or E25, 27% or E27 and 30% or E30.
The duty exemption is in line with the quality standards specified by the Bureau of Indian Standards (BIS), the notification said, which came into effect from Wednesday.
Although the four EPB blends mentioned in the latest notification have been exempted from applicable central excise duty, the petrol component will attract appropriate central excise duty and the ethanol component will attract appropriate Goods and Services Tax (GST).
“The objective is only to remove the confusing imagery under the Central Excise law which may result in re-imposition of excise duty on the activity of blending ethanol with petrol, thereby avoiding any incidence of double taxation,” said an official requesting anonymity.
There has been no change in the central excise duty rate on petrol for domestic consumption, the official said. According to the official, “The exemption has been provided on the same lines that already exists for EBP blends like E5, E10, E20 etc.”
“Blending of ethanol with petrol at the depot level is in principle a manufacturing activity attractable of excise duty,” a petroleum ministry official said.
The same clarification has been issued for higher blends also and there is nothing new in it, the official said. “With higher BIS standards becoming available, similar excise duty exemptions have been extended to E22, 25,27 and E30,” the official said.
According to the Petroleum Ministry official, “This is a prerequisite for eventually introducing higher blends, but nothing has been said yet about introducing higher blends as this will be done only after extensive testing and consultation.”
Bipin Sapra, tax partner at EY India, said the government’s move to extend excise duty exemption on EBPs up to 30% ethanol content “underpins India’s clean energy transition”. “This move removes the tax burden, reduces crude oil consumption, supports flex-fuel adoption and promotes the shift towards sustainable fuel consumption,” he said.
