NEW DELHI: Union Minister for Road Transport & Highways Nitin Gadkari on Tuesday clarified in a tweet that there is no proposal for a 10% additional GST increase on diesel vehicles under active consideration by the government. “There is an urgent need to clarify media reports suggesting an additional 10% GST on the sale of diesel vehicles. It is essential to clarify that there is no such proposal currently under active consideration by the government,” he wrote in a post on X, formerly Twitter.
“In line with our commitments to achieve Carbon Net Zero by 2070 and to reduce air pollution levels caused by hazardous fuels like diesel, as well as the rapid growth in automobile sales, it is imperative to actively embrace cleaner and greener alternative fuels. These fuels should be import substitutes, cost-effective, indigenous, and pollution-free.”
India imposes 28% tax on passenger vehicles and an additional cess of about 20% is levied, depending on the vehicles’ engine capacity. Most diesel engine-powered vehicles fall under the highest tax slab and an additional tax of 10% can further dent its demand. Moreover, almost the entire commercial vehicle and tractor segment is powered by diesel. The penetration of diesel has come down from nearly 48% in 2014 in the passenger vehicle segment, to only 18% in 2022. Gadkari said the industry must aspire to completely stop the manufacturing.
He warned that the government would hike taxes so much that it would be difficult for companies to sell diesel vehicles. “Say bye to diesel soon, otherwise we will increase so much tax that it will become difficult for you to sell these vehicles,” said Gadkari at an SIAM event where executives of Tata Motors, Mahindra & Mahindra, Toyota and many other companies were present.
“Diesel is a hazardous fuel for the environment and the industry must suo moto reduce diesel engine production. As a deterrent, I would appeal to the Finance Minister to increase the GST on diesel vehicles by 10% as a pollution tax.”
Gadkari’s statement shook the auto industry with shares of auto and oil marketing companies registering a big intraday fall on Tuesday. Meanwhile, Piyush Goyal, commerce and industry minister, speaking at the event, said while the auto industry has been able to reduce its import dependence, it is still not at satisfactory levels.