PVs' GST Rate Outdated, Needs Review: JSW MG CEO Emeritus

18 Jul 2024 CW Team

Regarding speculations about tax incentives for hybrid vehicles ahead of the Union Budget, he stated that only strong 'plug-in' hybrids, capable of operating as battery electric vehicles independently from internal combustion engines, should qualify for such benefits.

Chaba commented, "Earlier, we used to define the size of the car as sub-four meters and based GST structure on engine sizes like 1.2 litres or 1.5 litres. I think those days are over," indicating a need for a revision in policy.

Currently, electric vehicles (EVs) attract a GST rate of 5 per cent, hydrogen fuel cell vehicles 12 per cent, and smaller passenger vehicles with petrol, CNG, or LPG engines up to 4 metres in length and up to 1,200 cc engine size are taxed at 28 per cent with a 1 per cent compensation cess.

Diesel passenger vehicles up to 4 meters in length and up to 1,500 cc engine size face a GST rate of 28 per cent with 3 per cent cess. Larger petrol and diesel vehicles are taxed at 28 per cent with higher cess percentages based on engine size and vehicle type.

Chaba proposed that GST rates should prioritize environmental friendliness, technology's potential to save on import costs, local manufacturing capabilities, and low total cost of ownership. He suggested, "The policy should be based on these considerations. If EVs are deemed the best option, they should have a 5 per cent GST rate. If CNG proves advantageous, it should be preferred over petrol and diesel."

He added, "Strong hybrids should be prioritized over conventional fuels, and EVs should be encouraged as the optimal choice."

Acknowledging potential industry disagreements, Chaba emphasised that a focused policy approach would enable OEMs to concentrate on their chosen technology platforms.

JSW MG Motor India CEO Emeritus Rajeev Chaba emphasized that the current GST rate structure for passenger vehicles in India needs to be updated to align with new developments in the auto industry. He suggested that the government should consider several factors such as vehicular emissions, reducing the import bill, establishing a sustainable local supply chain, and minimizing total cost of ownership while formulating policies for the auto sector. Regarding speculations about tax incentives for hybrid vehicles ahead of the Union Budget, he stated that only strong 'plug-in' hybrids, capable of operating as battery electric vehicles independently from internal combustion engines, should qualify for such benefits. Chaba commented, Earlier, we used to define the size of the car as sub-four meters and based GST structure on engine sizes like 1.2 litres or 1.5 litres. I think those days are over, indicating a need for a revision in policy. Currently, electric vehicles (EVs) attract a GST rate of 5 per cent, hydrogen fuel cell vehicles 12 per cent, and smaller passenger vehicles with petrol, CNG, or LPG engines up to 4 metres in length and up to 1,200 cc engine size are taxed at 28 per cent with a 1 per cent compensation cess. Diesel passenger vehicles up to 4 meters in length and up to 1,500 cc engine size face a GST rate of 28 per cent with 3 per cent cess. Larger petrol and diesel vehicles are taxed at 28 per cent with higher cess percentages based on engine size and vehicle type. Chaba proposed that GST rates should prioritize environmental friendliness, technology's potential to save on import costs, local manufacturing capabilities, and low total cost of ownership. He suggested, The policy should be based on these considerations. If EVs are deemed the best option, they should have a 5 per cent GST rate. If CNG proves advantageous, it should be preferred over petrol and diesel. He added, Strong hybrids should be prioritized over conventional fuels, and EVs should be encouraged as the optimal choice. Acknowledging potential industry disagreements, Chaba emphasised that a focused policy approach would enable OEMs to concentrate on their chosen technology platforms.

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