The GST Council is considering a 15 percentage point tax cut for hybrid vehicles as a method to boost the struggling auto sector, Business Standard reports.
The rate reduction from 43 percent to 28 percent would be done by removing the cess on such vehicles, it added. The auto industry is in need of corrective measures as sales of passenger vehicles nosedived by 30.98 percent in June, the lowest growth in 20 years.
Thus, the council will at its meeting on August 6 weigh the viability of a rate cut against the possible impact on GST collections from a tax reduction, the paper noted.
"Cutting rates for hybrid vehicles appears easier than the other categories of the automobile sector because it may have a limited impact, in terms of revenue. The matter will be discussed by the panel before the proposal is finalised," a government official told BS.
Hybrid vehicles use a small internal combustion engine (ICE) and an electric motor to minimise emissions. The development was under consideration as the Ministry of Road Transport and Highways in a letter to the Finance Ministry had sought the rate reduction on such vehicles.
Besides, except for electric vehicles, bicycles and rickshaws, all other commercial and personal use two- and four-wheelers were brought under the 28 percent GST slab. For electric vehicles, the Council had in July cut rates from 12 percent to 5 percent.
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 paper noted.
Reduction in GST rates for the sector could bring down prices and thereby improve sentiment, MS Mani, partner, Deloitte India told BS, but added that the demand push due to such a cut would need to be evaluated.
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