GST framework and State taxing power over non-potable alcohol after constitutional amendment and saving provisions

Extra Neutral Alcohol and other non-potable alcohol were treated as industrial alcohol, not alcoholic liquor for human consumption, so their taxation moved into the GST framework after the 101st Constitution Amendment. Article 246A and Article 366(12A) were read to cover all supply of goods except alcoholic liquor for human consumption, while the substituted Entry 54 of List II was confined to the specified commodities and did not extend to ENA, rectified spirit, or SDS. Entry 8 of List II was treated as a regulatory entry, not a taxing power, and the saving provision in Section 174(1)(i) did not preserve the earlier UPVAT levy on ENA. The note therefore treats the separate "non GST alcohol" notification as beyond legislative competence and lacking valid delegation.

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Issues: Whether the State Legislature had legislative competence to levy UPVAT on Extra Neutral Alcohol and allied non-potable alcohol after the 101st Constitution Amendment, and whether the impugned notification and consequential assessment notices were valid.

Analysis: Extra Neutral Alcohol was treated as industrial alcohol and not as alcoholic liquor for human consumption. The constitutional scheme introduced by Article 246A and Article 366(12A) brought all supply of goods, except alcoholic liquor for human consumption, within the GST framework. The substituted Entry 54 of List II preserved State taxing power only for the specified commodities, not for ENA or rectified spirit. Entry 8 of List II was held to be a general regulatory entry and not a taxing entry, so it could not sustain a levy of tax. In view of Section 174(1)(i) of the Uttar Pradesh Goods and Services Tax Act, 2017, the earlier UPVAT regime was not saved to the extent of taxing ENA. The notification creating a separate entry for "non GST alcohol" was therefore beyond legislative competence and also lacked valid delegation.

Conclusion: The State had no authority to levy UPVAT on ENA, rectified spirit, or SDS after the 101st Constitution Amendment, and the impugned notification and consequential assessment orders and notices were ultra vires and liable to be quashed.

Final Conclusion: The writ petitions succeeded, the challenged levy was invalidated, and consequential relief followed, including refund directions subject to unjust enrichment.

Ratio Decidendi: After the 101st Constitution Amendment, tax on non-potable alcohol falls within the GST regime, and a State cannot impose such a levy by relying on a general constitutional entry or a delegated notification when the saving provision preserves only alcoholic liquor for human consumption.

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