Hybrid car tax was proposed to be reduced from 48 percent to 12 percent, now denied
The Finance Ministry, under the leadership of Nirmala Sitharaman, is currently not inclined to discuss the possibility of granting hybrid car tax concessions in the forthcoming GST council meeting. This decision comes despite a request from Nitin Gadkari, the Minister of Road Transport and Highways, who advocated for a reduction in GST on hybrid vehicles.
This stance by the Finance Ministry may be perceived as a positive development for Indian automobile giants such as Mahindra and Tata Motors. The ministry’s reluctance to consider tax concessions for hybrid cars suggests a broader policy direction, one that seems to prioritise other initiatives over incentivising hybrid vehicle adoption.
Gadkari’s proposal sought to lower the GST on hybrid cars to 12%, citing potential benefits for promoting eco-friendly transportation and curbing pollution levels. Currently, hybrid vehicles, along with internal combustion engine vehicles, attract a 28% GST, with additional cess, resulting in tax rates exceeding 40% for certain vehicles.
While Gadkari’s push aligns with the government’s broader agenda of promoting cleaner technologies in the automotive sector to address climate change and reduce air pollution, the Finance Ministry appears to have reservations about extending tax concessions to hybrid vehicles at this time.
It’s worth noting that the government’s focus seems to be more directed towards promoting electric vehicles as part of its environmental and sustainability objectives.
The stance taken by the Finance Ministry could have implications for various stakeholders, including not only major Indian automobile manufacturers but also global players like Toyota, Maruti Suzuki and Honda, who have been investing in hybrid vehicle technology. These companies primarily concentrate on hybrid vehicles that utilise both petrol and electric motors, with sales showing an upward trend.
While there is a growing demand for hybrid cars, Gadkari’s suggestion to reduce taxes on these vehicles does not seem to find favour with the finance minister. This indicates a divergence in opinions within the government regarding the most effective strategies for promoting sustainable transportation options while also balancing revenue considerations.
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