Nitin Gadkari, the Minister of Road Transport and Highways, has presented a noteworthy proposition. At the News18’s Rising Bharat Summit 2024, Gadkari highlighted the importance of reducing the Goods and Services Tax (GST) on hybrid vehicles. He suggests reducing the GST on hybrid cars from 28% to 12%.
Tax Cuts for Hybrid Cars
Nitin Gadkari pointed out that hybrid cars may not be as clean as electric vehicles, but they still contribute to environmental benefits. Additionally, he noted that hybrids operate primarily on electricity, accounting for 60 per cent. Moreover, they emit less pollution compared to traditional ICE vehicles.
At present, hybrid vehicles incur a total tax rate of 43% – (28% GST) and (15% Cess). Nitin Gadkari proposes to reduce GST to 12%, which would lead to a total tax of 27%, with (12% GST) and (15%Cess). As a result, hybrids will be cheaper by 16%.
Furthermore, the GST rate for electric vehicles in India is 5%. However, according to him, the notably high tax rate levied on hybrids seems unfair. Moreover, Nitin Gadkari intends to promote the adoption of hybrids and EVs, as they play a significant role in India’s sustainable future.
According to reports, Gadkari has asked Nirmala Sitharaman, finance minister, to address this matter at the upcoming GST Council meeting.
The auto industry is one of the significant contributors to the Indian government’s GST revenue. With a notable export market, the reduction in tax on hybrids could potentially increase the growth of the Indian auto industry. Additionally, it may reduce imports and strengthen the position of India in the global auto market.
Plan for a Sustainable Future
Although Nitin Gadkari promotes EV adoption in the country, he also supports the Flex-fuel technology. He highlighted that even a flex-fuel-powered car is an eco-friendly mode of transportation. Moreover, the Union Minister has been urging automakers to produce flex-fuel vehicles.
Interestingly, he currently has a Toyota Innova with a flex engine. Moreover, these engines can transition between 100 per cent petrol or ethanol fuel. This technology offers an economical and eco-friendly solution. Also, with it, India would rely less on imported fossil fuels.
Outcome of Reduced GST on Hybrids
If what Nitin Gadkari proposed does come true, there might be a significant rise in demand for hybrid cars in the country. Some of the hybrids available in India include the Maruti Grand Vitara (Rs. 10.76 lakh), Toyota Innova HyCross (Rs. 19.77 lakh), and Honda City hybrid (Rs.18.89 lakh). (All Ex-showroom Prices)
The reduction in tax rates may incentivize automakers to launch hybrid cars in the Indian market. Taking this into consideration, Maruti is planning to roll out hybrid variants of the upcoming Swift and Dzire models.
