Hybrid cars must haul the cess load for longer

livemint.com:

NEW DELHI : Hybrid cars in India may remain pricey for a while, with a top panel tasked to review taxes on them yet to formally meet even once, in the backdrop of a divided auto industry. Besides, any change in automobile taxes is unlikely without a comprehensive overhaul in the GST framework, two people aware of the development said. On 11 January, the Union heavy industries ministry formed a panel of vehicle testing agencies, petroleum ministry officials and auto industry bodies to study whether hybrids should have lower compensation cess.

The cess, levied on top of goods and services tax, depends on vehicle type, engine size and fuel. Generally, small cars attract a cess of 1-3%, while SUVs and luxury cars bear 15-22%. For hybrids, the cess for current models is 15%, taking the total tax levied on them to 43%.

Battery EVs face 5% GST, and no cess. Meanwhile, the industry is divided between companies such as Maruti Suzuki and Toyota Kirloskar Motor which favour lower cess for hybrids and flex-fuel vehicles, and Tata Motors and Mahindra and Mahindra want the benefits solely for EVs. EV makers have also resisted a proposal to lower GST on flex-fuel vehicles which can run on ethanol-blended fuel of up to 85%, a committee member said on condition of anonymity.

Any attempt to lower hybrid taxes will confuse the industry, a Tata Motors executive said in January. "Even on flex fuels, the same companies who want rationalization on taxes for hybrids are the ones advocating for incentives for this technology; the rest aren't. The reason is, if companies are making investments on EVs, a sector which demands hefty capital for very low returns in the near future, they would want that technology to be promoted.