The government intends to maintain the tax differential between electric vehicles and hybrid vehicles for a long period to drive the adoption of battery-powered vehicles in the country, according to G20 Sherpa Amitabh Kant.
The GST on vehicles powered by internal combustion engines, including hybrid technology, stands at 28%, while it is 5% on electric vehicles. However, with the inclusion of cess and other state taxes, the total tax on ICE vehicles goes up to 48%, depending on the model.
“We have had a policy framework where the tax on electric vehicles is just 5% as compared to 48% on hybrid, which we intend to continue over a long period of time,” Kant said while speaking at Mercedes-Benz’s Sustainability Dialogue India 2024 on Tuesday.
Kant’s comments at a time when major hybrid carmakers Maruti Suzuki and Toyota Kirloskar have been pushing the government to reduce the tax on hybrid cars.
The automakers have been advocating that hybrid cars are cleaner than EVs in terms of total carbon emissions in the current scenario where almost 75% of the country’s energy is generated by coal.
Recently, the Uttar Pradesh government removed the road tax on strong hybrid cars, making such cars cheaper by around 10%
However, Kant said that the government’s policy framework is to “push for more and more electrification of mobility in India through all policy levers available including CAFE norms.” He noted that the government has created a differential on EVs through reduced tax and expects a lot more innovations and model launches in the coming days.
Electric vehicle adoption in India is still in the low-single digits, driven mostly by two-and three-wheelers. The government has set a target of 30% electric vehicle adoption by the end of the decade.
Kant said India needs to ensure that electric vehicle adoption happens in a big way for sustainable and cleaner transportation, considering the country’s booming automobile market that is driven by urbanization and low vehicle penetration.
“Almost 68-70% of India’s mobility market is two-wheelers. Two-wheelers, three-wheelers, and four-wheelers are critical, and to my mind, they will be driven by batteries. There are buses and trucks, which are also critical. But there, green hydrogen will be a better option than batteries for long-distance transport,” he said.
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