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Auto industry today termed clubbing of hybrid vehicles along with luxury cars in GST rates as environment unfriendly and regressive step, saying it went against plans to promote green vehicles.
Under the GST rates announced yesterday, large cars with engine greater than 1,500 cc and SUVs with length more than 4 metres and engine greater than 1,500 cc are slated to attract 15 per cent cess over and above peak rate of 28 per cent.
Hybrid vehicles will also fall in the category under GST. In comparison, tax on electric vehicles has been kept at 12 per cent.
At present hybrid vehicles attract excise duty of 12.5 per cent, similar to the ones on entry level small cars such as Tata Nano or Maruti Alto.
Some of the popular hybrid vehicles sold in India are Camry Hybrid and Prius from Toyota and Honda Accord. These are priced between Rs 31.98 lakh to Rs 38.96 lakh.
"This is a very environment unfriendly, regressive tax rate as far as hybrid vehicles are concerned. It goes against the government's drive to promote eco-friendly vehicles," Toyota Kirloskar Motor Vice Chairman and Whole Time Director Shekar Viswanathan told PTI.
He said this was not expected from this government, which has been very forward looking otherwise.
"Hybrids and electric vehicles feed from the same ecosystem and the least that they could have done was to keep the rate on hybrid vehicles at peak rate of 28 per cent without the cess," Viswanathan said.
Expressing similar sentiments, Maruti Suzuki India Chairman R C Bhargava said: "Putting hybrid cars at par with luxury cars is against the stated government policy to promote use of such vehicles. We are going to seek clarity on the matter."
He further said: "We believe it as an inadvertent error on the part of the government, unless they have decided to change the policy on promoting such cars in the country."
Society of Indian Automobile Manufacturers secretary general Vishnu Mathur said: "We don't understand at this moment why the government has not continued with the promotion of hybrid vehicles when it is trying to promote green vehicles."
Honda Cars India Ltd (HCIL) Senior Vice-President (Marketing and Sales) Jnaneswar Sen said: "We will have to wait and watch till there is clarity on second phase of FAME scheme. As things stand now, there will be an impact on Accord Hybrid".
Overall, the industry players were unanimous that the GST rates will not impact prices of normal cars and passenger vehicles in a big way.
"As far as all cars are concerned, there would be minimal impact. It is only hybrid cars which will have an impact as they have been placed at the highest tax bracket along with luxury cars," Bhargava said.
Viswanathan also said the GST rates will not push up car prices much and from that point it is consumer friendly.
"Overall, the rates announced are as per our expectations. Rates on small cars remain similar to what they are now, while tax rates on SUVs and bigger cars have been moderated," Mathur said.
Under the GST rates, cars will attract the top rate of 28 per cent with a cess in the range of 1 to 15 per cent on top of it.
While small petrol cars with engine less than 1,200 cc will attract 1 per cent cess, that with a diesel engine of less than 1,500 cc will attract 3 per cent cess.
Large cars with engine greater than 1,500 cc and SUVs with length more than 4 metres and engine greater than 1,500 cc will attract cess of 15 per cent.
Earlier this year, government withdrew incentives given to mild hybrid vehicles under FAME India scheme.
With an aim to promote eco-friendly vehicles, the government had launched the FAME India scheme in 2015 offering incentives on electric and hybrid vehicles of up to Rs 29,000 for bikes and Rs 1.38 lakh for cars.