Rationalizing GST on Flex-Fuel Vehicles is Essential

05-Jan-2026 08:14 PM

New Delhi. The Director General of the Indian Sugar and Bio-Energy Manufacturers Association (ISMA), the apex body of the domestic sugar industry, has stated that the upcoming Union Budget should address issues such as rationalizing the GST rate on flex-fuel vehicles and ensuring a higher blend of ethanol in petrol.

According to the Director General, the sugar industry has high expectations from the upcoming budget as it is currently grappling with several serious problems and challenges that can only be overcome with government support.

The association says that an increase in the domestic demand and consumption of ethanol is essential, as this will provide distilleries with the opportunity to increase production and utilize their total installed capacity to the fullest.

The consumption of ethanol-free petrol can increase in flex-fuel vehicles, but it is subject to a high GST rate. If this is rationalized, the consumption of ethanol-blended petrol will increase.

Furthermore, the target for ethanol blending in petrol is currently set at 20 percent, which has already been achieved. The government should now set a new target with a significant increase.

The Director General of ISMA said that since electric vehicles (EVs) are subject to only 5 percent GST, flex-fuel vehicles should also be taxed at the same rate, instead of the current 18 percent. The 18 percent GST on smaller vehicles also needs to be reduced to 5 percent.

Similarly, ethanol-blended fuel should be included in the 5 percent tax bracket instead of the current 18 percent. Entrepreneurs have invested huge capital in the ethanol manufacturing industry, but they are not receiving adequate returns.