Ethanol-blended petrol excise duty exemption: India lifts levy on E22 to E30 grades

The Centre has waived central excise duty on higher ethanol-blended petrol grades to stop possible double taxation during fuel blending. Official notifications said the relief applies only when excise duty is already paid on petrol. GST must also be paid on the ethanol used in the blend.

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The Central Board of Indirect Taxes and Customs (CBIC) issued exemptions for ethanol blended petrol (EBP) grades E22, E25, E27 and E30. These grades contain 22 per cent, 25 per cent, 27 per cent and 30 per cent ethanol. The exemptions took effect on June 10, the publication date in the Official Gazette.

CBIC excise duty exemption for ethanol blended petrol grades

Officials explained that blending ethanol with petrol is treated as manufacturing under Central Excise rules. Petrol attracts excise duty, while ethanol is taxed under GST. After blending, the finished fuel could face excise duty again on the full quantity. An official statement said this risk created a double levy concern.

Government sources said the change only removes a provision that could trigger excise duty twice. A government source said the aim is to avoid any incidence of double taxation. Officials added the step does not cut excise duty on petrol sold domestically. The move instead aligns tax handling for new grades with existing blends.

The exemption follows the approach already used for E5, E10 and E20 fuels, officials said. For blends up to 20 per cent ethanol, the Ministry of Finance had already exempted excise duty on blended petrol. That earlier decision ensured taxes already paid were not charged again after blending. The same logic has now been applied to higher grades.

BIS standards and future rollout of ethanol blended petrol

Officials said the measure supports regulation for possible higher blends later. It does not announce immediate retail sale of E22, E25, E27 or E30. Officials said the exemption is needed because blending at fuel depots is classed as manufacturing. Without it, the blended product could again draw excise duty.

BIS standards for higher ethanol blends E22, E25, E27 and E30 were issued in May 2026. The excise duty waiver was extended to these grades through the June 10, 2026 notification. "This is a preliminary prerequisite for higher blends, but doesnt convey anything about roll out of higher blends, which will only be done after extensive testing and consultation, the statement said.\" The statement also said the sole purpose is avoiding double levy.

India ethanol blending programme and ethanol blended petrol targets

India has stepped up ethanol blending to lower crude oil imports, reduce emissions, and support agriculture. State-run oil marketing companies raised blending from 1.53 per cent in the ethanol supply year (ESY) 2014-15. The level reached 20 per cent in ESY 2025-26, according to the statement. Officials linked the increase to broader energy and farm goals.

The statement said the programme led to payments of about Rs 1.62 lakh crore to farmers since 2014-15. It also helped save more than Rs 1.91 lakh crore in foreign exchange. Officials said crude oil substitution was about 31 million tonnes. Estimated carbon dioxide emissions fell by about 93.1 million tonnes.

Officials said the expanded excise duty exemption for ethanol blended petrol is meant to keep tax treatment consistent. The relief applies only after excise duty on petrol and GST on ethanol are already paid. Authorities said any future decision on higher blends will follow testing and consultations. The notifications mainly remove the risk of excise being charged twice.

With inputs from PTI