The Department for Promotion of Industry and Internal Trade (DPIIT) has put forth a proposal to the Ministry of Heavy Industries, urging a reduction in taxes on hybrid cars. The move comes in response to concerns raised by hybrid vehicle manufacturers, such as Suzuki and Toyota, regarding the substantial tax gap between hybrid and electric cars.
Background: Addressing Tax Disparity
Hybrid vehicles, equipped with both an internal combustion engine and an electric motor, stand as a more eco-friendly option due to their ability to charge electric batteries through regenerative braking. However, the current tax structure places a Goods and Services Tax (GST) and cess of 43% (28% GST and 15% cess) on hybrid cars. In contrast, electric cars enjoy a significantly lower tax rate of just 5%.
Environmental Considerations and Fuel Efficiency
Hybrid cars offer a blend of fuel efficiency and reduced emissions, making them an attractive choice for environmentally conscious consumers. The proposal to reduce taxes on hybrid cars seeks to align the tax structure more equitably, encouraging the adoption of cleaner mobility solutions.
Current Tax Scenario and Proposal’s Progress
As per the current tax structure, petrol and diesel cars above 1200 cc and 1500 cc face a GST of 28% and cess ranging from 17% to 20%. The proposal to reduce taxes on hybrid cars is presently under consideration and will be forwarded to the Finance Ministry upon decision. The final verdict on GST reduction for hybrid cars, however, rests with the GST Council.
