Industry wants GST relaxation, fuel-price guarantee for flex-fuel vehicles

The industry has sought 5 per cent GST on flex-fuel two-wheelers and a price guarantee on fuel for flex-fuel vehicles

The automobile industry has requested the government to cut goods and services tax (GST) on two-wheelers running on flex-fuel and bring it to five per cent, ETAuto has reported. The manufacturers have said that the relaxation will help the shift towards green mobility. Notably, the government charges five per cent GST on electric two-wheelers.

The use of blended fuel, which uses a mix of regular petrol and ethanol, also supports farmers as the ethanol used in flex-fuel is produced from molasses which is a by-product of the sugar industry. Waste food grains are also used to make ethanol used in flex fuel. Currently, two-wheelers compatible with fuel containing 20 per cent ethanol are available in the Indian market and they are badged as "E20" compatible.

Additionally, the ET report cited government sources as saying that representatives from the auto industry have requested the government for a price guarantee on fuel.

A senior government official told ET, "The industry has sought five per cent GST on flex-fuel two-wheelers and price a guarantee on fuel for flex-fuel vehicles (FFVs). They are seeking fuel at a price 35 per cent lower than E10 to compensate for the loss of fuel efficiency, better-running costs and increase customer acceptability of these vehicles."

With the implementation of E20 blends in fuel from 2025 becoming mandatory, vehicle prices are likely to go up. As things stand, India uses the E10 category of fuel, meaning fuel containing 10 per cent ethanol and 90 per cent petrol.

Flex-fuel vehicles run on a fuel with a higher proportion of ethanol which results in lower fossil fuel consumption and lower emissions. However, the downside of using flex fuel is that the mileage of the vehicle also drops because of the low calorific value of the blended fuel.

The recommendations were made by the industry body Society of Indian Automobile Manufacturers (SIAM), ET reported. This comes at a time when the Ministry of Road, Transport and Highways (MoRTH) is preparing a policy to encourage the roll-out of flex-fuel vehicles in the country.