Hybrids hit hard by GST, see massive price hikes

Under GST which kicked in today, most passenger vehicles sold in India have seen reductions in prices owing to the lower tax rates. Hybrids, however, have come out losers with a massive 12.7 percent hike in effective tax. 

In the past, to popularise the fuel-saving technology, the government had set hybrid taxation at 30.3 percent. This rate was lower than even compact petrol vehicles which had an effective rate of 31.5 percent. However, the rule did not differentiate between mild and full hybrids. As a result, mild hybrid cars like the Maruti Ciaz SHVS benefitted massively too, despite a marginal improvement in fuel efficiency.

With GST, the government proposed to rectify this by moving hybrids into the same tax bracket as large vehicles which attract an effective rate of 43 percent. Once again, though, a differentiation was not made between mild and full hybrids, and, as a result, cars like the Toyota Camry Hybrid and Prius have seen hikes to the tune of Rs 350,000 and Rs 520,000 respctively. This, despite offering significant fuel-saving benefits. 

The government had seen requests from the industry to address the situation, but the mood is now set to promote electric vehicles with its plan to go fully electric by 2030. This plan, drafted by government think-tank NITI Aayog has attracted criticism for being too ambitious and not in tune with realities like the current lack of EVs  and charging infrastructure or the wide availability of cleanly generated electricity.

Though still at a nascent stage in our market, hybrids are now likely to be killed off. Also, many manufacturers had plans to bring in more hybrids; Hyundai had announced both mild and full hybrid cars, with the Ioniq (full plug-in hybrid) set to launch early next year. 

This technology may live on in larger cars where the additional price can be absorbed. However, price- sensitive small cars – a segment where the volumes could have translated to good fuel savings – will fail to see this technology through.

Also read: GST and its impact on vehicle prices in India