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Making it Electric: BS Yediyurappa writes to FM to withdraw GST Cess on hybrid cars


Making it Electric: BS Yediyurappa writes to FM to withdraw GST Cess on hybrid carsBengaluru: Karnataka has renewed efforts with the Centre to review imposition ofGST cesson hybrid vehicles, which chief ministerBS Yediyurappahas called steep, and said discourages investments in the fledgling sector.

The chief minister has written to finance minister Nirmala Sitharaman requesting her to slash the GST impost and promote eco-friendly EV vehicles. Yediyurappa’s request to Sitharaman, who represents Karnataka in the Rajya Sabha, should be seen in the context of the problems Toyota Kirloskar Motor (TKM) is battling as the GST cess makes the price of its hybrid variant Camry very steep. In February 2020, the automaker launched Toyota Vellfire, a petrol electric hybrid vehicle targeting the affluent customers.

The chief minister in his letter has highlighted the importance of transition to electric mobility through local manufacturing in the backdrop of Covid-19 and the geo-political developments.

“The GST for hybrid vehicles (HEVs) is at the rate of 28 per cent plus cess of 15 per cent, thus a cumulative GST tax rate of 43 per cent would be applicable to HEVs. This rate would put HEVs in the same bracket of luxury cars,” he said in the latter that ET has seen.

The chief minister said that despite customer acceptance for both EVs and HEVs, the GST difference is huge. “The present difference of 43 per cent and 5 per cent GST for HEVs and EVs respectively is too wide, though HEVs are from the same family as EVs. The encouragement of HEVs by way of reduced GST will facilitate a greater presence of these vehicles in India,” Yediyurappa said in his letter, while urging the Centre to slash GST and remove the barrier for adoption of HEVs.

TKM executives declined to comment on the issue. Toyota top management has been putting in efforts to get the cess withdrawn, without which, the company always said, sales of such cars will be low and manufacturing of hybrid vehicles in India would not be feasible.

Last year, union transport minister Nitin Gadkari had written to the finance ministry to reduce the GST on hybrid vehicles, after the GST council decided to slash GST for electric vehicles to 5 per cent.

Former Karnataka Industries Minister R V Deshpande too had asked the Centre to reduce GST on hybrid vehicles during his term. Deshpande, who unveiled Karnataka’s EV policy, told ET that the Centre should respond on priority if it is really keen on promoting eco-friendly mobility. “As it is, there is little or no investment coming in this sector despite the talk about Make in India. The government must understand that it will not be able to generate revenue unless it brings down taxes on hybrid vehicles,” he said.

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