It was in July this year that the GST Council decided to reduce the tax rate on electric vehicles (EVs) to 5 per cent from 12 per cent, a move aimed at accelerating the adoption of eco-friendly mobility solutions. The GST rate came into effect from August 1, 2019. However, hybrid cars and SUVs went from being taxed at 30.3 per cent to 43 per cent – an increase of 13.3 per cent. Hybrids, now classified under the highest GST tax slab saw prices of cars sky rocket. However, Nitin Gadkari, Union Transport Minister, today said that hybrid vehicles must get the same reduced GST benefit as electric cars in the country. This means that hybrid cars will attract just 5 per cent GST like electric vehicles and this will see a massive reduction in GST, 38 per cent reduction, to be precise. In fact, he went on to state that the recommendation for this has already been made to the Finance Ministry and now the department is following up.
Prior to GST, hybrid vehicles were taxed 30.3 percent (12.5 percent excise duty, 12.5 percent value-added tax, 2 percent central sales tax and 1 percent national calamity contingent duty). Under GST, it attracts 28 percent tax and 15 percent cess – like big petrol and diesel luxury cars. The recommendation to reduce GST on hybrid cars will be a welcome move for manufacturers like Volvo, BMW, Toyota and even Maruti Suzuki, all of whom are looking to introduce hybrid vehicles into the market. This is also see other manufacturers changing their plans to include more hybrid vehicles in their portfolio.
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