GST 2.0 Has Clarified Govt’s Position On EV vs Hybrid Debate: M&M

Mahindra & Mahindra Ltd’s top management on Tuesday said the government’s GST reforms have effectively clarified its stance on electric vehicles (EVs) versus hybrids, ending months of speculation in the automotive industry over subsidy priorities and technology direction.

“The current GST guidance has kind of clarified the government’s position on it,” said Rajesh Jejurikar, Executive Director and CEO of the Auto and Farm Sector at M&M. “The choice of what GST rates go to different products is reflective, we believe, of the government’s position. So, at least in the near term, that debate is settled. There was uncertainty till the GST rate structuring was to come out but that has now clarified the overall direction that is intended by way of priority.”

Under the new GST structure, electric passenger vehicles remain the biggest beneficiaries, retaining the 5% concessional GST rate, signalling continued policy support for clean mobility. Hybrid vehicles, on the other hand, have received only partial relief. Small hybrids (under 1,200 cc petrol or 1,500 cc diesel and below four metres in length) will now attract 18% GST, while larger hybrids above those thresholds fall under the 40% GST slab, aligning them with conventional large cars and SUVs. For internal combustion engine (ICE) vehicles, the system has been simplified but remains tiered. 

M&M’s Group CEO and Managing Director Anish Shah said the company views EVs as the “technology for the future,” aligning with the government’s roadmap for global competitiveness. 

“Hybrid is, in a sense, an interim technology. The government has made a set of decisions in the GST program not to incentivize this and we think that’s a fair decision,” Shah said. “A hybrid without a charging infrastructure is largely closer to ICE. You need to be able to build charging infrastructure and EVs to set up India for manufacturing for the world, and that is the path we are on.” 

On government subsidies for EVs, Shah said, “We are ready to make vehicles that are required by the market based on subsidies that may be available. But, largely, we feel that the government should not be subsidizing vehicles in the long term. EVs are on a path where subsidies are needed only for the transition. Over time, we won’t need them.” 

Position on CAFE 3 Norms

Jejurikar said the company is closely tracking the draft Corporate Average Fuel Economy (CAFE 3) norms and expects them to be aligned with India’s EV-centric mobility roadmap. “The CAFE 3 is at a very early stage of draft discussion. SIAM is deliberating different points of view, and we believe the right approach is to align CAFE 3 design with the rest of the journey, which is EV as the primary destination, as reflected in the GST structuring,” he said.

Jejurikar added that Mahindra is confident of meeting the expectations of CAFE 3, given its existing EV portfolio and investments in clean technology. “We will be ready in a manner that allows us to meet the expectations set under the upcoming CAFE 3 norms. We’re already working toward that, having invested significantly in our EV journey. We feel comfortable that we should be able to comply with the new requirements once they come into effect,” Jejurikar said.

In September, the Bureau of Energy Efficiency came out with a revised draft of CAFE 3 norms that proposes to make average CO2 emissions stringent from April 2027, but gives relief for sub-4 m petrol cars. The proposal seeks to incentivize electric vehicles and range-extender hybrid electric (REE) vehicles in the same way, while offering incentives for plug-in hybrid, strong hybrid, and flex-fuel vehicles.