06.03.2024 MHI considers proposal to lower GST on flex fuel vehicles, but auto industry divided on the matter


Tata Motors and M&M are thr OEMs that are objecting to the lowering of GST on flex-fuel vehicles because of their strong portfolio on EVs.

The Centre is in discussions with the industry on the proposed lowering of the Goods and Services Tax (GST) on flex-fuel vehicles (FFVs) from the current rate of 28 per cent, but has not come to a consensus yet as stakeholders remain divided on the matter.

Senior officials at the Ministry of Heavy Industries (MHI), along with some industry representatives and senior officials from other departments concerned, had a meeting recently to look into the matter, but no conclusion was drawn as some of the companies do not agree to the proposal, multiple sources told businessline.

“We are conducting meetings…we are asking the stakeholders and different Ministries their views on the subject, but we are getting a mixed response. Some say that GST and cess should be reduced on flex-fuell vehicles because the government is promoting its adoption. But some others are opposing it,” a senior official at MHI told businessline on condition of anonymity.

According to another source privy to the matter, Tata Motors and M&M are the two OEMs that are objecting to the lowering of GST on flex fuel vehicles because of their strong portfolio on EVs.

The official said that there is no final decision yet and there will be more meetings on the same subject in the coming days. Currently, the FFVs attract GST rate of 28 per cent, plus 15 per cent cess. Except electric vehicle (5 per cent GST) and hydrogen fuel cell vehicles (12 per cent GST), all other vehicle categories (including two-wheelers) attract a GST of 28 per cent.

All original equipment manufacturers (OEMs) have to make at least one model , which runs on flex fuel, the official said.

Flex fuel mandate

“All companies manufacturing four-wheelers and two-wheelers are required to make at least one model which is a flex fuel vehicle. Every one has to do it, whether it is Maruti Suzuki, Tata Motors, Mahindra & Mahindra or Hyundai Motors. But there continues to be disagreement over whether GST should be lowered,” the official explained.

The MHI is expected to review this question and submit its version to the Finance Ministry and GST Council as early as possible, the official said. Much would depend on whether the automobile industry is able to come put forward a “similar” view point, he added.

“The discussion is more towards two-wheeler makers because the industry is pushing for it. The more FFVs in the segment, the government can also save a lot on oil imports…the two-wheeler firms are in complete consensus for reduction in GST on FFVs,” the source added.

Last year, the Indian Sugar Mills Association (ISMA) has put forth an appeal to the Ministry of Road Transport and Highways, had also sought for a relaxation in the GST on FFVs so that their sector can also benefit in return (producing ethanol blends).


Source: The Hindu

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