GST on Alcohol and Liquor in India — Is Alcohol Exempt from GST?

Updated: 3 June 2026 | CGST Act, 2017 | Verified against CBIC notifications

Alcohol for human consumption is completely outside the GST framework in India — it is not taxed under GST at all. Beer, wine, whisky, rum, vodka, gin, arrack, and toddy are governed by state excise duty and state VAT, with rates set independently by each state. Only industrial alcohol and denatured spirit attract 18% GST. Ethanol supplied for petrol blending under the EBP programme attracts 5% GST.

0% GST

On all alcohol for human consumption — governed by state excise + VAT instead
Industrial / denatured alcohol: 18% GST (HSN 2207). Ethanol for EBP fuel blending: 5% GST by CBIC notification.

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Restaurant / bar billing alert: If a restaurant charges GST on the liquor portion of your bill, this is incorrect. Liquor is outside GST — only food, non-alcoholic beverages, and other service-related items should carry GST. You are entitled to reject a GST charge on liquor at the bill stage.

GST Applicability by Type of Alcohol

The GST applicability on alcohol depends entirely on the intended use, not just the type of product. The legal basis is Article 246A of the Constitution read with Entry 51 of the State List (Schedule VII), which keeps "alcoholic liquors for human consumption" exclusively under state jurisdiction.

Type of Alcohol / Product	GST Applicable?	Governing Law	Typical Rate
Beer (all types)	No GST	State Excise + VAT	Varies by state (20–200% total)
Wine (grape / fruit)	No GST	State Excise + VAT	Varies by state
Whisky, Rum, Vodka, Gin, Brandy	No GST	State Excise + VAT	Varies by state (50–300%+)
Arrack / Country Liquor	No GST	State Excise + VAT	Nominal in most states
Toddy (palm wine)	No GST	State Excise (often exempt)	Mostly nil / nominal
Industrial / Denatured Alcohol	18% GST	CGST Act / IGST Act	18% (HSN 2207)
Rectified Spirit (industrial use)	18% GST	CGST Act / IGST Act	18% (HSN 2207)
Ethanol for EBP (fuel blending)	5% GST	CBIC notification	5% (concessional)

State-Wise Liquor Tax Overview

Since liquor is under state jurisdiction, tax rates vary dramatically across India. Rates below are approximate — actual rates depend on brand category (IMFL, country liquor, beer) and are frequently revised by state excise departments.

State	Excise + VAT Range (Approx.)	Notable Features
Maharashtra	45% – 290% ad valorem	Tiered by IMFL category; additional surcharge in Mumbai; FMCG distribution model
Delhi	10% – 50% VAT equivalent	Historically lower rates vs other metros; home delivery permitted; policy changes frequent
Karnataka	70% – 200%	High excise for spirits; wine and beer taxed lower to support local industry
Tamil Nadu	Govt monopoly (TASMAC)	State controls manufacture and retail through TASMAC; prices fixed; no open competition
Telangana / Andhra Pradesh	Varies widely	Telangana has high excise on spirits; AP has had periods of prohibition historically
Gujarat / Bihar / Mizoram / Nagaland	Prohibition states	Sale and consumption banned; no excise/VAT applicable; liquor possession is a criminal offence
Goa	Among lowest in India	Tourism-oriented low rates; duty-free entry limits apply for inter-state carry

Restaurants and Hotels Serving Liquor — Correct Billing

When a hotel or restaurant serves food and alcohol together, the bill must correctly separate GST-applicable items from non-GST items. The correct treatment under current law is:

Item on Bill	Tax Applicable	Rate
Food and non-alcoholic beverages	GST (no ITC for restaurant)	5% (most restaurants); 18% if within hotel with tariff above ₹7,500/night
Alcoholic beverages (beer, wine, spirits)	State VAT / Excise — no GST	Varies by state — typically 20–45% VAT on MRP
Packaged mixer / soft drink (if separately billed)	GST	12% or 18% depending on item

Frequently Asked Questions

Why is alcohol for human consumption outside GST in India?

Alcohol for human consumption (beer, wine, whisky, rum, vodka, gin, arrack, toddy etc.) was deliberately kept outside the GST framework under Article 246A read with Entry 51 of State List (Schedule VII of the Constitution). This was a political compromise during GST implementation — states were unwilling to cede their significant excise and VAT revenues from liquor to a federal GST council. Liquor revenues are a primary revenue source for state governments and states insisted on retaining full control. As a result, liquor for human consumption continues to be taxed under state excise duties plus state VAT/sales tax, with rates set independently by each state.

What taxes actually apply to alcohol and liquor in India?

Alcohol for human consumption is subject to: (1) State Excise Duty — levied on manufacture or import of liquor into a state; rates vary widely by state and liquor type; (2) VAT (Value Added Tax) — some states levy VAT on sale of liquor in addition to excise; (3) Additional levies — many states add welfare cess, development fee, or surcharge on top of excise and VAT. There is no Central GST, State GST, or Integrated GST on alcohol for human consumption. Combined tax burden can exceed 100% of production cost in many states. Industrial alcohol (denatured spirit, rectified spirit for industrial use) does attract 18% GST under HSN 2207.

What GST applies when a restaurant or bar sells alcohol?

When a restaurant, hotel, or bar sells liquor across the counter, the liquor portion of the bill does NOT attract GST — it is covered by state excise and VAT. However, the food items and non-alcoholic beverages on the same bill attract GST at 5% (most restaurants — ITC not available). The service component is bundled into the food/service price. So on a typical bar bill: liquor = state excise + VAT (no GST); food/snacks = 5% GST; mixers/soft drinks may be taxed separately. Some establishments erroneously charge GST on liquor — this is incorrect and the amount should not be passed on to customers.

Does GST apply to ethanol or industrial alcohol?

Yes. Ethanol used for industrial purposes, denatured spirit, and rectified spirit supplied for non-human consumption purposes attract GST at 18% (HSN 2207). However, ethanol supplied for blending with petrol under the government's Ethanol Blended Petrol (EBP) programme was made exempt from GST by CBIC notification to facilitate the blending mandate. As of 2026, ethanol for fuel blending (supplied to oil marketing companies under the EBP scheme) is at 5% GST; ethanol for other industrial uses (pharmaceuticals, sanitisers, chemicals) attracts 18% GST. Denatured ethyl alcohol (rendered unfit for human consumption) also attracts 18% GST.

Can a business claim ITC (Input Tax Credit) on liquor purchases?

No. Since alcohol for human consumption is outside the GST framework entirely, there is no GST paid on its purchase — and therefore no ITC can be claimed. Excise duty and state VAT paid on liquor purchases are not creditable under GST. For a bar or restaurant, the excise/VAT cost of liquor is a straight business cost. For a manufacturer using industrial alcohol (which bears 18% GST), normal ITC rules apply — GST paid on input industrial alcohol can be set off against output GST liability on finished goods, subject to standard ITC eligibility and Rule 42/43 apportionment where inputs serve both GST and non-GST supplies.

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