No revision in cess on hybrid and small cars: FinMin

The finance ministry on Thursday ruled out lowering cess on hybrid cars, days after the Goods and Services Tax (GST) Council empowered the Centre to bring amendments to the compensation law to increase the ceiling of cess on luxury cars.

A finance ministry official said there would not be any downward revision in the GST rate or cess for hybrid cars. He also tried to allay fears of the auto industry over an imminent hike in the ceiling on cess on luxury cars from 15 per cent to 25 per cent, saying it was just “an enabling provision”.

The official also clarified that there would not be any hike in cess on small cars. Currently, the cess on small cars is in the range of 1-3 per cent over 28 per cent peak GST rate, against the ceiling of 15 per cent.

The demand for hybrid cars has seen a decline since July 1 when companies raised prices by as much as 20 per cent to pass on the impact of the GST. Toyota, which was seeing a gradual acceptance of its Camry Hybrid, has witnessed a dip in demand by about 30 per cent. Maruti Suzuki, the biggest carmaker in the country, which offers mild hybrid vehicles like Ciaz and Ertiga, said a “steep” decline was already visible.

The government has decided to tax hybrid vehicles at 43 per cent (including a 15 per cent cess), a rate identical to what luxury cars attract under the GST.

Hybrid vehicles earlier attracted taxes of about 30 per cent. In markets like Delhi it was even lower due to a differential in the value-added tax.

The Society of Indian Automobile Manufactures has approached the government with a request to bring down the rate on hybrid vehicles from 28 per cent to 18 per cent while doing away with the cess.