Alcohol for human consumption is completely outside the GST framework. Beer, wine, whisky, rum, vodka, gin, arrack and toddy are not taxed under GST at all — they carry state excise duty plus state VAT, set independently by each state. Only industrial and denatured alcohol attract 18% GST (HSN 2207), and ethanol for petrol (EBP) blending is at 5%. GST 2.0 (effective 22 September 2025) did not bring liquor under GST.
GST on Alcohol — by Type of Product
GST applicability depends on the intended use, not just the product. "Alcoholic liquor for human consumption" is kept under state jurisdiction; everything else follows the normal HSN rate schedule.
| Product | GST? | Rate | Governing Law |
|---|---|---|---|
| Beer (all types) | No | Outside GST | State excise + VAT |
| Wine (grape / fruit) | No | Outside GST | State excise + VAT |
| Whisky, rum, vodka, gin, brandy (IMFL) | No | Outside GST | State excise + VAT |
| Arrack / country liquor | No | Outside GST | State excise + VAT |
| Toddy (palm wine) | No | Outside GST | State excise (often nil) |
| Industrial / denatured alcohol | Yes | 18% | HSN 2207 · CGST/IGST Act |
| Rectified spirit (industrial use) | Yes | 18% | HSN 2207 · CGST/IGST Act |
| Ethanol for EBP (petrol blending) | Yes | 5% | Concessional · CBIC notification |
Rates confirmed under the GST 2.0 structure effective 22 September 2025. Alcohol for human consumption remains outside GST. Verify on the official portal before invoicing.
"Outside GST" is not the same as "GST-exempt (nil-rated)". Nil-rated goods are inside the GST law at 0%; alcoholic liquor is constitutionally excluded from GST altogether, which is why it never appears on a GST invoice and no GST return reports it.
Why Is Alcohol Outside GST?
When GST was introduced, alcoholic liquor for human consumption was deliberately kept out. Under Article 246A read with Entry 51 of the State List (Schedule VII of the Constitution), excise on liquor stays exclusively with the states.
- Liquor excise + VAT is a primary revenue source for state governments.
- States were unwilling to surrender that revenue to a federal GST Council.
- So liquor continues under state excise duty + state VAT/sales tax, with each state setting its own rates.
- Combined tax on liquor can exceed 100% of production cost in many states.
✓Outside GST (state tax only)
- Beer, wine, IMFL spirits
- Arrack & country liquor
- Toddy / palm wine
- Any liquor for human consumption
!Inside GST (18% / 5%)
- Industrial ethyl alcohol
- Denatured & rectified spirit
- Ethanol for pharma / sanitiser (18%)
- Ethanol for EBP fuel blending (5%)
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How a Bar or Restaurant Bill Should Be Taxed
When a hotel, restaurant or bar serves food and drinks together, the bill must separate GST items from the non-GST liquor. The restaurant GST applies only to the food side.
| Item on the bill | Tax head | Rate |
|---|---|---|
| Food & non-alcoholic beverages | GST (no ITC, most restaurants) | 5% · 18% in specified premises |
| Alcoholic drinks (beer, wine, spirits) | State VAT / excise — no GST | Outside GST |
| Packaged mixers / aerated drinks (billed separately) | GST | 18% / 40% for aerated |
Food in a hotel with declared room tariff ≥ ₹7,500/night is taxed at 18% with ITC. Aerated / sugary drinks are a demerit item at 40% under GST 2.0.
If a bill shows GST on the liquor line, that is incorrect — liquor is outside GST and only carries state VAT/excise. A customer is entitled to have any GST wrongly charged on the alcohol portion removed at the bill stage.
- 1Split the billFood vs alcohol lines
- 2Food sideGST 5% (or 18%)
- 3Alcohol sideState VAT / excise
- 4Correct invoiceNo GST on liquor
Industrial Alcohol & Ethanol GST
Alcohol not meant for drinking is a normal taxable good. Denatured spirit and rectified spirit for industrial use attract 18% GST under HSN 2207. Ethanol supplied to oil companies for petrol (EBP) blending is concessionally taxed at 5%.
18% Industrial alcohol supply
5% Ethanol for EBP blending
- Ethanol for pharmaceuticals, sanitisers and chemicals attracts 18% GST.
- Ethanol under the Ethanol Blended Petrol (EBP) programme is at 5% to support the blending mandate.
- Denatured ethyl alcohol (rendered unfit for drinking) is 18%.
Can You Claim ITC on Alcohol?
Because drinkable liquor is outside GST, no GST is paid on it — so there is no Input Tax Credit to claim on liquor stock. Excise/VAT on liquor is a straight business cost.
| Purchase | ITC? | Reason |
|---|---|---|
| Liquor stock for a bar / restaurant | No | Outside GST — no GST paid to credit |
| Industrial alcohol used in manufacture | Yes | 18% GST input · normal ITC rules |
| Ethanol (EBP) bought by an OMC | Yes | 5% GST input · subject to ITC eligibility |
Where inputs serve both GST and non-GST (liquor) supplies, apportion ITC under Rule 42/43.
A restaurant that both serves food (5% GST, no ITC) and sells liquor (state VAT) is running two tax systems on one bill. Keeping the liquor turnover cleanly out of your GST return avoids notices — a common audit trigger.
- Constitutional basis: Article 246A + Entry 51, State List (Schedule VII)
- Rates & notifications: gst.gov.in
- CBIC rate finder: cbic-gst.gov.in
- Industrial / denatured alcohol: HSN 2207 · 18% GST
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.