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Hybrid vehicle tax in India proposed to be reduced from 48 percent to 12 percent

Nitin Gadkari, the Minister of Road, Transport & Highways, has made a noteworthy proposition regarding the hybrid vehicle tax in India. Gadkari advocated for a reduction in the GST on hybrids from the current 48 percent to 12 percent, citing their significant electric operation and minimal pollution footprint.

Presently, electric vehicles in India are subject to a 5 percent GST, whereas hybrids face a substantially higher tax rate of 48 percent. Gadkari expressed concern over this discrepancy, highlighting the environmental benefits of hybrids compared to conventional internal combustion engine vehicles.

Gadkari’s proposal aims to stimulate the adoption of hybrid and electric vehicles in the country, aligning with the government’s broader objectives of promoting sustainable mobility and reducing pollution levels. He emphasised the need for discussions on this matter at the upcoming GST Council meeting, underscoring the potential industry benefits, decreased imports and environmental gains associated with a lower tax regime for hybrids.

The automotive sector holds significant importance in India, being a major contributor to GST revenue and boasting a thriving export market. Recent statistics showing India’s surpassing of Japan in new car sales underscore the sector’s growth trajectory, with Gadkari expressing optimism about India’s potential to become a leading automotive manufacturing hub globally within the next five years.

Gadkari recently unveiled a Toyota Innova equipped with a flex engine capable of running on both petrol and ethanol. This technology, embraced by several prominent automakers, offers a cost-effective and eco-friendly alternative, reducing dependence on imported fossil fuels.

If the proposal of GST reduction on hybrid vehicles gets implemented, there will be a huge demand for strong hybrid cars like Maruti Grand Vitara, Toyota Hyryder, Toyota Innova HyCross, Honda City hybrid and the likes. More carmakers will consider introducing hybrid vehicles in the Indian market. Maruti is planning to launch strong hybrid versions of the new gen Swift and Dzire that will further accelerate the adoption to a wider audience.

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