Big cars and SUVs, which attracted about 50-55 per cent taxes earlier, will become cheaper under the GST regime, with an indirect tax incidence of only 43 per cent (including cess). This move to have reduced tax on big cars is intriguing. It seems to convey that the Government agrees with the stance that auto manufacturers have always taken: vehicle pollution is a lesser evil than other forms of pollution and that bigger cars could actually be less polluting because of the superior technology that they use. Yet, other moves by the Government such as the decision to skip BS V emission norms and move to BS VI by 2020, the move towards a scrappage scheme for old vehicles or the more recent ambitious talk of an all-electric vehicle fleet by 2030, show that it is indeed serious about vehicular emissions.

Equally counter-intuitive is the removal of concessions given to hybrid vehicles. These vehicles enjoy an excise duty of 12.5 per cent, as against the 24-30 per cent on large cars. Under GST, small cars attract a cess of 1-3 per cent over the 28 per cent scheduled rate for motor vehicles; hybrids, such as large cars and SUVs, will have to pay a 15-per cent cess over the scheduled rate. Electric vehicles are taxed at 12 per cent and are exempt from cess.

Agreed, hybrids aren’t completely green, but aren’t they at least less polluting than cars that entirely depend on petrol or diesel? By disincentivising hybrids, the Government seems at cross-purposes with itself, as it does encourage them along with electric vehicles under the FAME (Faster adoption and manufacturing of (hybrid and) electric vehicles) scheme. Mahindra & Mahindra and Toyota have introduced hybrid models under this scheme. Such OEMs who have invested in hybrid technology are now left in the lurch due to these policy flip-flops. Time the Government made up its mind on what it really wants.

Chief Research Analyst

Related Topics