Re-think on high GST for hybrids next week

A draft proposal for new mobility policy by the India government’s think-tank NITI Aayog has a strong tilt towards electric vehicles (EV). However, the proposed GST on hybrids passenger vehicles at 43 percent, from an existing levy of 30.3 percent, compared to the 12 percent proposed tax on EVs has not gone down well with automakers.

While most OEMs have welcomed the GST rates, there is some apprehension on the high rate of taxation on hybrid vehicles which are typically seen as a pathway to going full electric. Vinod Dasari, president, Society of Indian Automobile Manufacturers, said, “Differential GST for EVs will also help electric mobility to gain momentum in India. We would have liked to see a similar differential duty on hybrid vehicles to continue.”  

Prior to the GST rates being announced, hybrid cars attracted an excise duty of 12.5 percent, similar to entry-level small cars, 1 percent national calamity contingency duty, 2 percent sales tax, and 12.5 percent VAT, bringing the total tax incidence to 30.3 percent.

The FAME India scheme, which was initiated in April 2015 to support hybrid/electric vehicle market development and a manufacturing eco-system, incentivises consumers to adopt newer and cleaner technology.

The hybrid car segment has received a far better consumer response compared to EVs. While an estimated 22,000 EVs, including 2,000 two-wheelers were sold in India in FY2015-16, demand for hybrids, more specifically mild hybrids, was much higher. Lack of charging infrastructure, high ownership cost and low range of EVs continue to be a deterrent for their mass adoption. It may be recollected that on April 1, 2017, after 73,633 mild hybrids were sold under the FAME India scheme, the subsidy to mild hybrids was withdrawn.