GST Council may not lower burden on hybrid vehicles

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NEW DELHI: The Centre on Sunday indicated that it was unwilling to lower the GSTburden on hybrid cars, which face a 43% levy along with SUVs and other luxury cars, as it did not want mild hybrids to walk away with gains.

The stance came despite a strong pitch from states such as Karnataka, which argued for a reduction in the rate for hybrids. Karnataka is home to Toyota, which has been leading the fight for a lower levy for Camry and Prius. The financeministry is, however, of the view that mild hybrids from the Maruti Suzuki and Mahindra stable were pocketing “undue gains”, prompting Karnataka to suggest that a separate classification be made for “genuine” hybrid vehicles. The auto industry has long been split on the issue. Finance ministry Arun Jaitley told reporters, “We have done a detailed study on auto industry demand and a paper has been made, which will be circulated among members. And, if necessary, it would come up for discussion. The fact that is being presented (by the industry), according to the paper, is not correct.”

 The auto industry started protesting against the move soon after the rates were made public last month and the government had indicated that it would look at the overall structure and the impact on small cars. Sources said the government was offering a lower rate of 12% for electric vehicles, which will feed into the overall green vehicle ecosystem. A view within the government is that most genuine hybrids are large vehicles, and most of them bought by companies for their executives or promoters.
The automakers had asked in their demand to the GST Council that the tax rate be lowered to 18%, arguing that hybrids are much more efficient and eco-friendly, but require scale and volume to become economically viable. The current formulation will push up the tax incidence on hybrid vehicles from an effective rate of around 30% to 43%. At present, hybrids attract 12.5% excise duty, similar to entry-level small cars such as Tata Nano or Maruti Alto.

Although hybrid cars are exempt from infrastructure cess, there is a 1% National Calamity Contingent Duty, 2% Central Sales Tax and 12.5% VAT, which takes the total incidence to over 30%.
source : http://timesofindia.indiatimes.com/business/india-business/gst-council-may-not-lower-burden-on-hybrid-vehicles/articleshow/59101406.cms

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