Minister of Road Transport and Highways Nitin Gadkari has urged the finance minister to reduce the goods and service tax on hybrid vehicles to 12 percent, as per media reports. Recently there have been reports that the government is considering a lower tax structure on hybrid vehicles – powered by a petrol engine and an electric motor.
India currently levies a goods and service tax (GST) of 28 percent on vehicles powered by internal combustion engines, including hybrids, and 5 percent on electric vehicles. However, with the inclusion of cess, the tax on hybrid vehicles is over 43 percent, depending on the model.
“Gadkari said that at present there is a 5 percent GST on electric vehicles and a 48 percent GST on hybrids. That number seems very unfair as Hybrids although not as clean EVs are far better for the environment than purely internal combustion-based vehicles. The Union Minister has said that this number should be reduced to just 12 percent soon as he intends to promote the sale of hybrid and electric vehicles,” the report said.
India’s largest passenger car maker has been advocating for a reduction in GST on hybrid cars for some time. With over 70 percent of India’s power generation currently coming from coal, Maruti Suzuki believes hybrid technology is cleaner than electric vehicles from a well-to-wheel perspective and will be relevant in the interim to lower the country’s transportation emissions.
Though there are only a few models available in the market, sales of hybrid vehicles have been gaining momentum. In 2023, the industry witnessed the share of hybrid vehicles increase to around 2 percent from 1.7 percent. Apart from Maruti Suzuki, automakers including Toyota and Honda also offer hybrid vehicles. Recently, Autocar Professional reported that Kia is also actively considering to introduce hybrid products in its line-up.
However, Tata Motors has reportedly said any attempt to lower tax rates on hybrid vehicles will confuse the industry and hybrids do not align with the key objectives of achieving net carbon-zero.