Union Minister of Heavy Industries, Anant Geete on Monday said he will take up the issue of lowering the 43% tax rate on hybrid vehicles under GST with Finance Minister Arun Jaitley.
On Tuesday, Jaitley hinted that the tax rate on hybrid cars will not be reviewed, saying the industry demands were not in sync with a study conducted by tax officers. The GST Council has fixed 43% tax (28% GST plus 15% cess) on hybrid cars, a rate that the automobile industry feels is too high for the fuel efficient vehicles.When contacted, Geete told PTI he would take up the issue with the finance minister.
Earlier also, the Heavy Industries Ministry had written to its finance counterpart seeking lowering of the 43% tax rate on hybrid cars.
Addressing reporters after the GST Council meeting on Monday, Jaitley said: “We have done a detailed study on auto industry demand and a paper has been made which will be circulated among members. And, if necessary, it would come up for discussion. The fact that is being presented (by the industry), according to the paper, is not correct”.We would like to know the contents of the report that the finance minister is talking about. First of all, we need to be clear about the definition of hybrid – vehicles that have an internal combustion engine and an electric motor. If they withdraw the benefit to hybrid vehicles, then people will go back to conventional petrol and diesel engines till the time all the infrastructure for electric vehicles are in place, which is not expected to happen in the next ten years.What the government needs to understand is that hybrids complement electric vehicles as they are part of the ecosystem.
The automakers in their demand to the GST Council had sought reduction in the tax rate on hybrid vehicles to 18%, arguing that they are much more efficient and eco- friendly, but require scale and volume to become economically viable.The tax incidence on hybrid vehicles will go up to 43% from the current effective tax rate of 30.3%.
Hybrid vehicles attract excise duty of 12.5% similar to entry-level small cars such as Tata Nano or Maruti Alto.
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