The Indian government has exempted petrol blended with higher levels of ethanol from excise duty as it seeks to make fuel beyond E20 more attractive for consumers and boost voluntary use, according to the Central Board of Indirect Taxes and Customs (CBIC).
Policy Details
The CBIC issued notifications this week exempting ethanol blended petrol (EBP) grades E22, E25, E27, and E30 — containing 22% to 30% ethanol — from applicable central excise duties. The exemption applies subject to excise duty having already been paid on the petrol component and Goods and Services Tax (GST) having been paid on the ethanol used for blending.
An official explained that the objective is to remove the "deeming fiction" under central excise law that could otherwise result in levy of excise duty again upon the blending activity, thereby avoiding any incidence of double taxation. The exemption mirrors the tax treatment already available to existing ethanol-blended petrol grades such as E5, E10, and E20, and does not represent a reduction in excise duty on petrol sold for domestic consumption, officials clarified.
| Ethanol Blend Grade | Ethanol Content | Excise Duty Status |
|---|---|---|
| E5, E10, E20 | 5%–20% | Already exempt |
| E22, E25, E27, E30 | 22%–30% | Newly exempt (June 2026) |
Official Comment
At a press conference, Sujata Sharma, Joint Secretary in the Ministry of Petroleum, stated: "A clarification has been issued for higher blends and there is nothing new with higher BIS standards available. The same excise duty waiver has been extended to E22, 25, 27 and E30." She added that this is a "preliminary prerequisite for eventually introducing higher blends but does not convey anything about roll out of higher blends as of now as that will only be done after extensive testing and consultation."
Impact on Blending Program
India has been steadily increasing ethanol blending in petrol under its National Policy on Biofuels, targeting E20 by 2025. The latest exemption removes a tax barrier for higher blends, potentially encouraging oil marketing companies and consumers to voluntarily adopt E22 and above. However, as Sharma emphasized, full rollout awaits further testing to ensure compatibility with vehicle engines and fuel dispensing systems.
For the downstream commodity market, the policy change does not alter the excise duty on petrol itself but eliminates the double taxation risk for blending activities. This could improve the economics for producing and distributing higher-ethanol fuels, though actual volumes will depend on infrastructure readiness and consumer acceptance. The CBIC's action signals policy continuity with the existing EBP framework, maintaining a level playing field for all blend grades.
As India pursues its ethanol blending targets, the exemption of higher grades from excise duty removes a regulatory hurdle, supporting the government's push for renewable energy in transportation. Market participants will monitor subsequent BIS standard updates and testing outcomes as the next steps toward commercialization of E22 and beyond.
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