Finance Minister Nirmala Sitharaman has reportedly decided against reducing the Goods and Services Tax (GST) on hybrid cars. The move, earlier proposed by Nitin Gadkari, could have made these vehicles cheaper by over Rs. 5 lakh. However, reports have claimed that Nirmala Sitharaman’s argument is that currently, the government wants to push electric car sales first. She wants to promote eco-friendly transportation and reduce pollution levels in the country by promoting electric vehicles.
The Finance Ministry, chaired by Nirmala Sitharaman, is not expected to discuss granting tax concessions to hybrid cars. It was believed that it could be done in the upcoming GST council meeting. As per ET Auto, this decision aligns with the ministry’s focus on boosting the electric vehicle (EV) sector.
This move will most likely favor Indian automobile giants such as Tata Motors and Mahindra Automotive. Both of these automakers have invested billions of dollars in creating electric cars in the country. Recently, Tata Motors Group CFO PB Balaji also shared his skepticism regarding the government’s proposal to reduce taxes on hybrid vehicles.
Why are hybrids not getting tax cuts?
The Finance Ministry’s decision to maintain the current GST rates on hybrid vehicles is likely aimed to promote the electric vehicle sector by focusing on reducing the GST for electric vehicles. The government aims to accelerate the shift towards cleaner energy solutions.
The finance minister is overlooking the potential short-term benefits of hybrids. Currently, strong hybrid cars could help in reducing pollution. They would also promote eco-friendly transportation in the country.
Nitin Gadkari’s Proposal for Lower GST on Hybrid Vehicles
Union Minister of Road Transport and Highways, Nitin Gadkari, just a few months ago proposed a substantial reduction in the GST on hybrid vehicles. He urged the finance minister to reduce the GST from 48% (inclusive of cess) to just 12%. He said that strong hybrids, which are cleaner than ICE vehicles, are being unfairly taxed.
Speaking at News18’s Rising Bharat Summit 2024, Gadkari emphasized the environmental benefits of hybrid vehicles. He stated that these vehicles are 60% electrically operated and emit minimal pollution compared to traditional ICE vehicles. He argued that reducing the GST on hybrids would incentivize their adoption. Gadkari added that it would contribute to a cleaner, greener future for India.
Impact on Hybrid Car Prices if GST Reduction was Implemented
Although it has now been reported that there will most likely be no reduction of GST on hybrids. We would like to tell you that Gadkari’s proposal if accepted, could have significantly lowered the prices of popular hybrid cars in India. The following are the details of how much cheaper each strong hybrid car could have become in the country.
Maruti Suzuki Grand Vitara
Currently priced at Rs. 20.09 lakh (ex-showroom), the Maruti Suzuki Grand Vitara is subject to a 28% GST and a 15% cess. The ex-factory cost of the Grand Vitara is approximately Rs. 11.45 lakh. With the proposed 12% GST and 15% cess, the new ex-showroom price would be around Rs. 14.54 lakh. This means that this reduction could have resulted in a price reduction of Rs. 5.55 lakh.
Toyota Urban Cruiser Hyryder
The Toyota Urban Cruiser Hyryder, priced similarly to the Grand Vitara, would have also benefited significantly. The most affordable hybrid variant is currently priced at Rs. 16.66 lakh, while the top-spec variant is priced at Rs. 20.19 lakh.
Applying the proposed GST reduction, the new price would be in the same range as the Grand Vitara. It could have also seen the same reduction of approximately Rs. 5-6 lakh.
Honda City Hybrid
The Honda City Hybrid is currently priced at Rs. 20.39 lakh (ex-showroom). With this proposal, it would have also seen a considerable price drop. The ex-factory cost of the Honda City Hybrid would be around Rs. 14.37 lakh. With the new tax rates, the ex-showroom price would decrease to about Rs. 18.25 lakh. This would have made it cheaper by Rs. 2.14 lakh.
Toyota Innova Hycross
Lastly, the Toyota Innova Hycross Hybrid, which currently is in extremely high demand, would have also seen a significant reduction in price. Presently, it ranges from Rs. 25.72 lakh to Rs. 30.698 lakh (ex-showroom).
Its top-end ZX(O) Hybrid variant’s ex-factory cost would be approximately Rs. 21.5 lakh. With the proposed GST reduction, the ex-showroom price would be around Rs. 25.5 lakh, resulting in a substantial price decrease of about Rs. 5.5 lakh. More details on these price reductions here.
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