Union Minister for Road Transport and Highways, Nitin Gadkari, had previously proposed a significant reduction in GST for hybrid vehicles, aiming to make them more affordable and accessible. Gadkari suggested lowering the GST from the current 48% to 12% on hybrids, like the Toyota Innova HyCross, to encourage eco-friendly transportation. This proposed tax cut would drop the price of the top-end V HYBRID trim from Rs 20.19 Lakh to Rs 15.83 Lakh, leading to potential savings of around Rs 7 to Rs 10 Lakh on the on-road price, depending on the city of purchase.
Despite these potential benefits, the Finance Ministry, under Nirmala Sitharaman, is not expected to discuss these tax concessions in the upcoming GST council meeting. Currently, hybrid and internal combustion engine (ICE) vehicles are taxed at 28% GST, with an additional 15% CESS for hybrids with engines above 1200cc for petrol and 1500cc for diesel. Hybrids below these thresholds do not incur the additional CESS. Gadkari argues that reducing GST on hybrids would help reduce pollution and support the government’s push for electric and hybrid vehicles as part of a sustainable future.
Automakers such as Honda, Toyota, and Maruti Suzuki, which have a significant focus on hybrid and petrol vehicles and are planning to introduce electric models, stand to benefit from such tax reductions. The sales of hybrid vehicles are on the rise, with more models expected soon from Maruti Suzuki and Toyota, keeping the possibility of future GST reductions in the spotlight.
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Gadkari’s proposal aims to align with the government’s efforts to promote environmentally friendly transportation options. While the Finance Ministry’s current stance is resistant, the ongoing rise in hybrid vehicle sales and future model introductions suggest that discussions on tax reductions for hybrids may resurface.