SIAM asks GST Council to lower hybrid vehicle rates by 10 percent

The Society of Indian Automobile Manufacturers (SIAM) has called upon the GST Council to do a rethink on the high level of taxation of hybrids, as proposed a few weeks ago.  SIAM has suggested the Council effects a 10 percent cut to bring eco-friendly hybrids into the base GST slab of 18 percent.

As is known, the government is set to roll out the new GST tax reform in the country with effect from July 1. While the overall rate structure applicable on automotive products was largely welcomed by industry, the positioning of hybrid vehicles in the 28 percent category took many by surprise, leading to the government-appointed panel promising a review of the same.

The total tax levied on a hybrid vehicle as proposed in the GST regime also includes an additional 15 percent cess, levied over and above the 28 percent GST rate, cumulatively adding up to 43 percent across segments. This is a good 13 percent higher than the rates prevailing in the pre-GST tax structure in the country.

Suggesting a better tax structure to drive consumer demand for hybrids, SIAM has recommended hybrid vehicles be categorised into three major segments and has proposed the following rates:

Small cars ( < 4m, engine < 1200cc Petrol) – 18% GST + cess of 1%

Small cars ( < 4m, engine < 1500cc Diesel) – 18% GST + cess of 3%

Large cars (>4m, engine < 1200cc Petrol/1500cc Diesel) – 18% GST + cess of 15%

Luxury cars (>4m, engine > 1200cc Petrol/1500cc Diesel) – 18% GST + cess of 15%

UVs (>4m, engine > 1200cc Petrol/1500cc Diesel, GC >170mm) – 18% GST + cess of 15%

As per SIAM, while a marginal movement in the tax rates is acceptable, a major drift of 13 percent will mark hybrid sales, which will be a stepping stone in the country’s shift towards electric mobility. According to Vishnu Mathur, director general, SIAM, “A gradual way to move up the ladder to full electric vehicles and to increase volumes for EVs would be to develop an ecosystem by step-wise introduction of vehicles which are closer to full electrics. This then, would require starting with sale of mild-hybrids, strong hybrids, plug-in hybrids and finally achieving the full electric stage, creating substantial volumes and also building the entire components industry around such vehicles. “

SIAM has also proposed a similar 18 percent rate to be considered in case of hybrid buses. This will help drive maximum deployment of such vehicles in congested urban cities, which call for the use of green mobility technologies.

Also read : GST Council may reconsider steep levy on hybrid cars next week