The Indian government is considering reducing the tax rates on hybrid vehicles, which are currently higher than those on electric vehicles (EVs). Hybrid vehicles use both an internal combustion engine (ICE) and an electric motor to power the wheels, resulting in lower emissions and better fuel efficiency than conventional petrol or diesel cars.
Current Tax Structure
The Centre currently imposes a 5 percent tax rate on EVs. Small hybrids currently attract a 28 percent tax while the large hybrid siblings attract a 43 percent tax . For ICE vehicles, the tax rate is 29 percent for sub-4m vehicles with 1.2-litre engines or lesser, 31 percent for sub-4m vehicles with 1.5-litre engines or lesser, 45 percent for vehicles longer than 4m, but with 1.5-litre engines or lesser, and 48 percent for 4m-plus vehicles with engines larger than 1.5 litres.
Proposed Tax Reduction
According to a letter from Toyota Kirloskar Motor’s head of the country Vikram Gulati to the Niti Aayog think-tank, which plays a key role in policymaking, the tax differential over petrol cars should be as much as 11 percent for hybrids and 14 points for flex-hybrids. This translates to a proposed tax rate of 37 percent on hybrid vehicles and 34 percent on flex-hybrid models. Flex-hybrid models are those that can run on both petrol and ethanol-blended fuels.
Toyota reportedly claimed that the five per cent differential between the petrol-only and hybrid cars is insufficient for the hybrid vehicles. The car manufacturer has reportedly argued that given the reduced emissions and better fuel consumption offered by the hybrid vehicles, they should be taxed at a lower rate. “We would kindly request for a proportionate policy support,” Vikram Gulati reportedly wrote in his letter to Niti Aayog.
Similarly, sources from the Ministry of Heavy Industries have also indicated that the government may reduce GST on flex fuel automobiles from 28 per cent to either 18 per cent or 12 per cent. GST on hybrid vehicles can also be reduced from 28 per cent to either 18 per cent or 12 per cent. Sources also told that the government has no plans to reduce GST on petrol and diesel vehicles.
Market Scenario
The Indian market has seen more strong hybrid models launched this year, starting with the Honda City e:HEV and more recently the Toyota Urban Cruiser Hyryder and the Maruti Suzuki Grand Vitara. In fact, 43 percent of the Grand Vitara’s bookings are for its strong hybrid versions, thanks to the high fuel economy that these models are expected to offer. And with products like these, carmakers like Maruti Suzuki are all for lower taxes on hybrid vehicles. “If hybrids are running 50 percent or even more on electric power, then there has to be some sort of support or incentives to promote them because they are environment friendly,” says Shashank Srivastava, executive director, Sales and Marketing, Maruti Suzuki.
Meanwhile, Toyota is also readying a third model, the Toyota Innova Hycross, which is expected to be produced at the same Bidadi plant that manufactures the Toyota-Maruti SUVs. Making multiple strong hybrid models together at one location and all of them sharing the same components helps economies of scale and cut down costs.
Hybrid vehicles are seen as a viable alternative to EVs in India, where charging infrastructure is still inadequate and consumer awareness is low. Hybrids can also help reduce India’s dependence on oil imports and contribute to its climate goals.
The Indian government is considering reducing the tax rates on hybrid vehicles, which are currently higher than those on electric vehicles (EVs). Hybrid vehicles use both an internal combustion engine (ICE) and an electric motor to power the wheels, resulting in lower emissions and better fuel efficiency than conventional petrol or diesel cars.
Current Tax Structure
The Centre currently imposes a 5 percent tax rate on EVs. Small hybrids currently attract a 28 percent tax while the large hybrid siblings attract a 43 percent tax . For ICE vehicles, the tax rate is 29 percent for sub-4m vehicles with 1.2-litre engines or lesser, 31 percent for sub-4m vehicles with 1.5-litre engines or lesser, 45 percent for vehicles longer than 4m, but with 1.5-litre engines or lesser, and 48 percent for 4m-plus vehicles with engines larger than 1.5 litres.
Proposed Tax Reduction
According to a letter from Toyota Kirloskar Motor’s head of the country Vikram Gulati to the Niti Aayog think-tank, which plays a key role in policymaking, the tax differential over petrol cars should be as much as 11 percent for hybrids and 14 points for flex-hybrids. This translates to a proposed tax rate of 37 percent on hybrid vehicles and 34 percent on flex-hybrid models. Flex-hybrid models are those that can run on both petrol and ethanol-blended fuels.
Toyota reportedly claimed that the five per cent differential between the petrol-only and hybrid cars is insufficient for the hybrid vehicles. The car manufacturer has reportedly argued that given the reduced emissions and better fuel consumption offered by the hybrid vehicles, they should be taxed at a lower rate. “We would kindly request for a proportionate policy support,” Vikram Gulati reportedly wrote in his letter to Niti Aayog.
Similarly, sources from the Ministry of Heavy Industries have also indicated that the government may reduce GST on flex fuel automobiles from 28 per cent to either 18 per cent or 12 per cent. GST on hybrid vehicles can also be reduced from 28 per cent to either 18 per cent or 12 per cent. Sources also told that the government has no plans to reduce GST on petrol and diesel vehicles.
Market Scenario
The Indian market has seen more strong hybrid models launched this year, starting with the Honda City e:HEV and more recently the Toyota Urban Cruiser Hyryder and the Maruti Suzuki Grand Vitara. In fact, 43 percent of the Grand Vitara’s bookings are for its strong hybrid versions, thanks to the high fuel economy that these models are expected to offer. And with products like these, carmakers like Maruti Suzuki are all for lower taxes on hybrid vehicles. “If hybrids are running 50 percent or even more on electric power, then there has to be some sort of support or incentives to promote them because they are environment friendly,” says Shashank Srivastava, executive director, Sales and Marketing, Maruti Suzuki.
Meanwhile, Toyota is also readying a third model, the Toyota Innova Hycross, which is expected to be produced at the same Bidadi plant that manufactures the Toyota-Maruti SUVs. Making multiple strong hybrid models together at one location and all of them sharing the same components helps economies of scale and cut down costs.
Hybrid vehicles are seen as a viable alternative to EVs in India, where charging infrastructure is still inadequate and consumer awareness is low. Hybrids can also help reduce India’s dependence on oil imports and contribute to its climate goals.