Tax on hybrid cars may soon be cut to 35%

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To promote hybrid cars in India, the government might soon push for a lower Goods and Services Tax (GST) cess of 25 percent on “strong” hybrid cars which would make the effective tax rate 35 percent, according to Moneycontrol. A multi-pronged approach to be adopted by the government to develop a positive environment for electronic vehicles (EVs), which includes lowering the tax rate.

“The GST rate on EVs has already been reduced to 12 percent as against the GST rates ranging from 28 percent to 45 percent in the case of internal combustion (IC) vehicles. Strong hybrid cars are also capable of reducing COemissions. They can be extended some GST benefits of say, 25 percent, as compared to ICE vehicles,” a note from the latest meeting, held on December 13 said.

The current tax rate for hybrid and ICE vehicles is 43 percent (including cess). After it was noted that the overall tax incidence had come down after the implementation of GST, the council, in September 2017, decided to hike cess on mid-sized cars by 2 percent, taking the effective GST rate to 45 percent. Likewise, cess on large cars was hiked by 5 percent, taking the total GST incidence to 48 percent while that of SUVs to 50 percent.

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