Tata Motors Says No Need to Cut GST on Flex-Fuel Cars

Tata Motors does not see the need for lower goods and services tax (GST) rates on flex-fuel vehicles for faster adoption, instead believes cheaper pricing of the fuel would be a more effective way to encourage adoption as India pushes for higher ethanol blending in petrol.

Some automakers and sugar industry players have been pushing the government to introduce some incentives, including a GST cut, for flex-fuel vehicles, which can run on higher ethanol blends and even 100% ethanol. Flex-fuel technology is being pushed as an alternative to help reduce crude oil imports and lower emissions without relying entirely on electric vehicles.

India achieved 20% ethanol blending in petrol earlier than its target and is now evaluating higher blends such as E25 and E30.

Tata Motors Passenger Vehicles Managing Director Shailesh Chandra said reducing fuel prices for higher ethanol blends would be more meaningful for customers than lowering vehicle taxes. “I think where the intervention needs to come ... is that we should reduce the price of the fuel to compensate for the fuel efficiency loss,” he said.

Under India’s current GST structure, electric vehicles attract a 5% tax, while conventional internal combustion engine vehicles, hybrids and flex-fuel vehicles fall under higher tax slabs of 18% and 40%, depending on vehicle size.

Brazil, one of the world’s most successful flex-fuel markets, uses differential fuel pricing to drive ethanol adoption. Higher ethanol blends there are cheaper than gasoline, encouraging consumers to switch.

Chandra said a GST reduction for flex-fuel vehicles was not justified because the additional cost of manufacturing such vehicles was relatively limited.

“There is absolutely no need to reduce GST,” he said, adding that large tax cuts could also hurt the shift toward electrification.

He also cautioned that moving to higher ethanol blends would require careful implementation, noting that fuel efficiency drops as ethanol content rises.

“The more ethanol ... there will be a drop. That's technically, it's a factual thing,” Chandra said, referring to fuel efficiency. He added that vehicles not designed for higher ethanol content could also face faster wear and tear on certain components.

Chandra said Tata Motors had already committed to launching at least one flex-fuel-ready model and would align future plans with the government’s roadmap and wider industry consensus.

Tata Motors is ready with technology for higher ethanol blends, with its first flex-fuel passenger vehicle expected by the end of this year or early 2027.