New GST on Alcohol in India: Why It’s Excluded from GST

Alcohol is one of the few major commodities in India that does not fall under the Goods and Services Tax (GST) system. Unlike most goods and services, the gst on alcohol in india is non-existent. But why is alcohol excluded? What taxes apply instead? And how does this affect pricing, compliance, and revenue? In this blog, we’ll explain why gst on alcoholic beverages is outside the GST framework, and what tax structure applies instead.

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Is GST Applicable on Alcohol in India?

No. As per Article 366(12A) of the Indian Constitution, alcohol for human consumption is kept out of GST. The power to tax alcoholic beverages is retained by individual state governments.

So, instead of GST, alcohol is subject to:

  • Excise duty (levied by the state)
  • Value Added Tax (VAT) (levied by the state)
  • Additional cesses or surcharges (may apply in certain states)

This makes gst on alcohol in india an exception within the indirect tax framework.

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Why Was Alcohol Kept Out of GST?

Alcohol was excluded from GST to:

  1. Preserve state revenue – States earn a large portion of their income from alcohol taxes.
  2. Maintain federal fiscal autonomy – Each state has the freedom to set tax rates on liquor.
  3. Political sensitivity – Taxing alcohol is a state subject with significant regional policies (like prohibition).

What Is the Alcohol Tax Structure in India?

Instead of GST, alcohol is taxed as follows:

Tax Component Who Levies It? Typical Rate
Excise Duty State Government Varies by state
VAT State Government 5% to 30%+
License Fees State Excise Department Annual/Monthly
Cess/Additional Levy Some States Fixed or % based

So, while there’s no gst on wine or liquor, the total tax burden can be over 60% of the selling price in many states.

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GST on Input Services Related to Alcohol

Although there’s no GST on alcoholic beverages, GST is applicable on:

  • Bottling and packaging services
  • Transportation and logistics
  • Equipment and maintenance
  • Advertising and marketing

However,  Input Tax Credit (ITC)  cannot be claimed on these services if they are used in the production or sale of alcohol for human consumption, as per Section 17(5) of the CGST Act.

GST on Related Products

Item GST Rate
Ethanol for industrial use 18%
Denatured alcohol (not for drinking) 18%
Alcoholic sanitisers 18%
Wine (for exports, industrial use) 18% – 28%

This means while the alcohol gst rate in india is officially 0% for human consumption, other forms of alcohol are still taxable under GST.

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Final Thoughts

The gst on alcohol in india remains a special case—alcoholic beverages are outside the purview of GST and are instead governed by a mix of excise duties, VAT, and state levies. For businesses, this means a dual compliance burden, as GST applies to some parts of the supply chain (like bottling or packaging) but not the final product. While alcohol continues to generate substantial revenue for states, it stands apart from the one-nation-one-tax vision of GST.

Jagdish Prasad
Jagdish Prasad
Chartered Accountant
MRN No.: 433417
City: Delhi

Jagdish Prasad is a Chartered Accountant with over 5 years of experience. He helps people and businesses with GST, income tax, and HSN codes. Jagdish makes sure his clients follow all tax rules and save money the right way. He also enjoys writing simple articles to help others understand taxes and stay updated with the latest rules.

Frequently Asked Questions

  • Is gst applicable on alcohol in india?
    No, alcohol for human consumption is excluded from GST. It is taxed under state excise and VAT.
  • What is the alcohol gst rate in india?
    There is no GST rate on alcohol for drinking. Other types like ethanol or sanitizers are taxed under GST.
  • Can liquor manufacturers claim ITC on inputs?
    No, manufacturers cannot claim ITC for inputs used in making alcoholic beverages.
  • Why is gst on wine not applicable like other products?
    Wine, beer, and other alcoholic beverages are all excluded from the GST net if meant for human consumption
  • Will GST ever apply to alcohol?
    It may in the future, but currently, it is excluded due to revenue and policy concerns.
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