GST Council to reassess rates for hybrid vehicles

The GST Council will meet to re-consider newly introduced GST rates for hybrid vehicles.

With the new announcement of the implementation of Goods and Service Tax (GST), automotive manufacturers could breathe a small sigh of relief. However, the GST on hybrid passenger vehicles inflated the levied tax to 43% from the 30.3%. While pure electric vehicles only attract 12% following the GST announcement. The hike in proposed taxes on hybrid vehicles left auto manufacturers highly disappointed.

Before GST was announced, Hybrid cars attracted a 12.5% excise duty, 12.5 % VAT, 2% sales tax and 1% national calamity contingency duty. This accumulated to a total of 30.3% of tax.

The Indian Government also introduced the FAME scheme in 2015 which awarded subsidies for hybrid and electric vehicles for fast track growth of eco friendly vehicles and promote them amongst consumers. The incentives were provided for hybrid cars, electric cars, electric bikes, e-scooters and mild hybrid cars as well. However, earlier this year, the incentives for mild hybrid were withdrawn as they were not proper hybrid vehicles which could run on electric power alone. However, since the introduction of the scheme, Hybrid cars attracted a significant amount of attention from buyers and both the two and four wheeler market gained momentum.

While the government has been advocating the use of more efficient and cleaner transport measures, many manufacturers felt that it was a regressive step and is counterproductive to the cause. The Ministry of Road Transport and Highways is expected to meet with the GST council to request a reduction in taxes for Hybrid passenger cars, while also on ethanol, bio-diesel and bio-CNG powered vehicles.

In the Indian market, Toyota, Honda, BMW, Volvo all have at least one hybrid product amongst their offering. While Hero MotoCorp and Mahindra, two Indian manufacturers have divisions who develop and manufacture pure electric vehicles. Nissan is also assessing the Indian market for their Leaf EV which is the best selling electric car in the world. Other manufacturers in India are also exploring hybrid technology for their products for the local market.