On September 2, 2024, Nitin Gadkari, the Union Minister for Road Transport and Highways, addressed the GST Council regarding a potential reduction in the Goods and Services Tax (GST) on flex-fuel vehicles. According to a report by PTI, Gadkari emphasized the necessity for state finance ministers to consider lowering the GST on these environmentally friendly vehicles to 12%.
This move aligns with his broader goal of reducing the country’s dependence on fossil fuels and promoting the use of biofuels. During his address at the India Bio & Tech Expo organized by the Indian Federation of Green Energy (IFGE), Gadkari highlighted the pressing need to cut down on fossil fuel imports and encourage biofuel usage.
He called for support from state finance ministers to facilitate this change, noting that the Union Finance Minister had pledged to help persuade them. In his effort to drive this initiative forward, Gadkari requested the participation of Maharashtra’s Finance Minister in the upcoming GST Council meeting to advocate for a reduction in GST on vehicles equipped with flex-fuel engines.
Additionally, he reached out to Uttar Pradesh Chief Minister Yogi Adityanath, urging him to consider the proposal for lowering taxes on these vehicles. In a separate discussion with Maharashtra Finance Minister Ajit Pawar, Gadkari recommended that Pawar attend a GST meeting with Union Finance Minister Nirmala Sitharaman to further discuss this issue.
Currently, the GST on internal combustion engine (ICE) vehicles, including hybrids, stands at 28%, while electric vehicles are taxed at a reduced rate of 5%. Gadkari’s proposal aims to bring the GST on flex-fuel vehicles more in line with that of electric vehicles to encourage their adoption.
Gadkari also addressed the economic implications of fossil fuel imports, pointing out that India spends approximately Rs 22 lakh crore annually on these imports. He stressed that this expenditure not only contributes to environmental pollution but also poses a significant economic burden.
By reducing fossil fuel imports and increasing the use of biofuels, Gadkari believes that the agricultural sector will be a key beneficiary. The automobile industry, which Gadkari noted generates approximately 4.5 crore jobs, plays a critical role in the economy by contributing substantial GST revenues to both state and central governments. He highlighted the success of Indian manufacturers like Hero and Bajaj, which export about half of their production.
With advancements in technology, these exports could potentially increase by 10-20%, given the global focus on reducing pollution. Gadkari concluded by mentioning the ongoing efforts to expand the National Highways network, underscoring the government’s commitment to improving infrastructure while fostering growth in the automobile sector.
