Heavy tax on hybrid cars may be reconsidered by GST Council

After the recent announcement by the GST council of the 43 percent tax levied on hybrid cars, the auto industry expressed disappointment and the structure is being reconsidered.

By: | Published: May 24, 2017 5:34 PM

The Goods and Services Tax (GST) was expected to work in favour of the Indian automotive industry, particularly for the hybrid and electric segments. Since the Government has been emphasising the push towards electric and hybrid vehicles, the GST council's 43 percent levy on hybrid cars was a disappointment. A number of vehicle manufacturers expressed their displeasure as the high GST rate on these environment-friendly cars would affect the sales. Now, the GST Council is reconsidering its decision for a review of the tax structure that would be implemented under the GST slab on hybrid cars.

The current tax rate on hybrid cars is 30.3 percent which would witness almost a 13 percent hike. This would put the price tag on such cars the same as non-hybrid models making it difficult for carmakers to sell such products. The council subjected a 28 percent GST rate last week, however, the addition 15 percent cess for mid-sized and large-sized hybrid cars puts the companies in a tight situation as most hybrid cars sold in the country fall in this tax slab. “This is a very environmentally unfriendly, regressive tax rate as far as hybrid vehicles are concerned. It goes against the government's drive to promote eco-friendly vehicles,” Shekar Viswanathan, Chairman and Whole Time Director Toyota Kirloskar Motors told PTI.

With the reconsideration of a revision in the tax rate for hybrid cars, automotive companies are still hopeful that the potential for hybrid and electric cars could be better in India. However, considering that the policies, particularly in regard to the sudden shift from BSIII to BSIV did not work in favour of the industry, particularly the commercial vehicle and two-wheeler segments. India's plans to become fully electric mobility solution country by 2030 would require minuscule tax rates and even rebates for such vehicles else potential customers may shy away from adopting newer technologies.

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