Cars may not become too costly after all; GST Council could reconsider levy

Tax incidence on hybrid vehicles will go up to 43% from current level of effective tax rate of 30.3%

The GST Council may reconsider the proposed 43 per cent tax on hybrid cars at its meeting next week after the auto industry voiced disappointment over the steep rate hike.

According to the tax slabs decided by the Council last week, the incidence of GST on mid and large-sized hybrid cars has been kept at the same level as passenger cars.

Under the GST, the tax incidence on hybrid vehicles will go up to 43 per cent from the current level of effective tax rate of 30.3 per cent.

"The tax incidence on hybrid vehicle has gone up and we are reading about the concerns being shared by industry. The Council may take a re-look at it in its next meeting on June 3," a revenue department official told PTI.

Auto industry sources said that they will write to the Finance Ministry this week explaining their position and how it would put a spanner in the wheels of government plans to promote alternate energy.

Auto industry has already said that the increased tax incidence is against the government's long-term goal of promoting green vehicles in the country.

Some of the popular hybrid vehicles sold in India are Camry Hybrid and Prius from Toyota and Honda Accord. These cars are priced between Rs 31.98 lakh and Rs 38.96 lakh.

A host of other companies were also planning to foray into the segment.

The GST Council, in its meeting last week, finalised 28 per cent tax rate for hybrid cars. However, mid-size and large-size hybrid cars have been subject to 15 per cent cess — same as similar sized passenger cars.

The official further said, the rates have been put up in public domain well before time so that the industry gets time to prepare for the Goods and Services Tax (GST) which will be rolled out from July 1.

"Concerns expressed by industry would be taken on board and any decision to change the tax rate would go back to the Council," the official said.

At present, hybrid vehicles attract excise duty of 12.5 per cent, similar to the ones for entry level small cars such as Tata Nano or Maruti Alto. Even though they are exempt from infrastructure cess, there is a 1 per cent National Calamity Contingent Duty, 2 per cent Central Sales Tax and 12.5 per cent VAT, which takes the total incident of tax to 30.3 per cent.

Commenting on the tax rates, Toyota Kirloskar Motor Vice Chairman and Whole Time Director Shekar Viswanathan had said "This is a very environment unfriendly, regressive tax rate as far as hybrid vehicles are concerned. It goes against the government's drive to promote eco-friendly vehicles".