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Industrial Alcohol and its Uses, Regulation of Alcohol in India

Context: The Supreme Court questioned the Centre’s exclusive control over industrial alcohol without giving States even the opportunity to regulate its inflow to prevent misuse for drinking.

About Industrial Alcohol

  • Industrial alcohol, also called denatured alcohol or ethanol.
  • Uses:
    • Chemical Industry: Ethanol is a key ingredient in the production of various chemicals and solvents such as acetic acid, ethyl acetate, and other derivatives.
    • Pharmaceuticals: It’s used as a solvent and preservative in the pharmaceutical industry and is also employed in the manufacture of medicines.
    • Manufacturing: Industrial alcohol is used in the production of rubber, paints, varnishes, and inks.
    • Fuel: Ethanol is blended with petrol to produce Ethanol Blended Petrol (EBP), which helps in reducing pollution and conserving fossil fuels.
    • Cleaning: Due to its solvent properties, it is used in cleaning agents for domestic and industrial purposes.
    • Cosmetics: It acts as an astringent in cosmetics and personal care products like perfumes and aftershaves.
    • Food Industry: It’s used in the food industry as a flavouring agent and in the extraction of flavours.
    • Agriculture: Industrial alcohol is used in the formulation of herbicides and insecticides.

Regulation of Alcohol in India

State Power (Intoxicating Liquors)

  • Entry 8 of the State List grants states authority over:
    • Production
    • Manufacture
    • Possession
    • Transport
    • Purchase
    • Sale
  • This applies specifically to “intoxicating liquors,” meaning drinks fit for human consumption.

Central Power (Industries)

  • Entry 52 of the Union List gives the central government control over industries deemed important for public interest by Parliament.
  • This includes industrial alcohol, regulated by the Industries (Development and Regulation) Act, 1951 (IDRA).

Concurrent Power (Regulation)

  • Entry 33 of the Concurrent List allows both states and the central government to regulate certain industries.
  • However, if a central law exists (like the IDRA for industrial alcohol), state laws cannot contradict it.
Excise Duty
  • Excise duty is an indirect tax charged on the production, licensing, and sale of goods, collected by the Government of India from goods producers.
  • This tax is specific to goods manufactured within the country, distinguishing it from Customs duty which applies to imported goods.
  • Pre-GST System: Before the implementation of the Goods and Services Tax (GST) in July 2017, excise duty was categorised into several types including Central Excise Duty, Additional Excise Duty, among others.
  • Post-GST Application: The launch of GST consolidated many forms of excise duties. Presently, excise duty is exclusively applied to petroleum products and alcoholic beverages.
  • Taxation Basis: While excise duty was charged at the time goods were removed from manufacturing, GST applies to the supply of goods and services.
  • Revenue for States: Excise duty on alcohol is a crucial source of revenue for state governments, which often increase excise duty on alcohol to boost their finances.
  • In 2023, Karnataka implemented a 20% increase in Additional Excise Duty (AED) on Indian Made Liquor (IML).

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