Nitin Gadkari wants states to pitch for GST cut on flex-fuel vehicles

'Biofuel share will be 50% of fossil fuels in 5 yrs'

As India aims to bring down its fossil fuel consumption, Union Minister for Road Transport and Highways Nitin Gadkari on Monday asked finance ministers of different states to propose reduction of Goods and Services Tax (GST) on flex-fuel vehicles at the next GST Council meeting.

“In the GST Council, we need support from finance ministers of different states. Recently, I spoke to the finance minister of Maharashtra, and I asked him to put up a proposal to reduce the GST on flex-fuel cars, scooters, etc. to up to 12 per cent,” the minister said at the India Bio-Energy & Tech Expo, organised by IFGE, in New Delhi.

Among others, the sugar industry has been seeking a 5 per cent GST on flex-fuel vehicles, as is in the case of electric vehicles. Currently, flex-fuel vehicles attract a GST of 28 per cent, which is uniform across two and four-wheelers.

However, some automobile producers, who have invested heavily in manufacturing of electric vehicles, have reportedly opposed the rate-cut proposal in the past.

In March, the ministry of heavy industries had also received several representations seeking a reduction in GST rates for these vehicles. The GST Council comprises finance ministers of different states along with Union Finance Minister Nirmala Sitharaman.

Gadkari said that 85 per cent of the transport sector is currently using fossil fuels, and there is immense potential for biofuels to grow going forward.

In October 2023, the ministry of road transport and highways had also told states in an advisory that they should consider reducing the road tax on flex-fuel vehicles the same way they’ve done for electric vehicles, in the interest of decarbonising the transport sector.

The minister also said that automakers need not worry about the viability of these vehicles, as the growth in the road coverage in India would mean higher demand for tourism, in turn boosting the demand for commercial vehicles for tourists, which can be run on alternative fuels.

He added that the size of the biofuel economy will be 50 per cent of the fossil fuel economy in the next five years.