After the GST Council empowering the Centre to bring an amendment in the compensation law to increase ceiling on cess on the luxury cars, infuriating auto companies, the finance ministry on Thursday ruled out lowering cess on hybrid luxury cars. Demand for hybrid cars has been on the decline ever since GST was rolled out in July.
A key finance ministry official said there would not be any downward revision in GST rates or cess for hybrid cars.
He also tried to allay fears of auto industry over imminent hike in ceiling on cess on luxury cars from 15 per cent to 25 per cent, saying it is just an enabling provision.
The official said there will not be any hike in cess in small cars. Currently, the cess is in the range of 1-3 per cent over 28 per cent peak GST rate, against the ceiling of 15 per cent.
Demand for hybrid cars are on a decline since July 1 when companies raised prices by as much as 20 per cent to pass on the impact of the goods and services tax (GST). Toyota, which was seeing a gradual acceptance of its Camry Hybrid, has seen demand dip by about 30 per cent. Maruti Suzuki, the biggest carmaker, with its mild hybrid vehicles Ciaz and Ertiga, said a 'steep' decline was already visible.
India has decided to tax hybrid vehicles at 43 per cent (including a 15 per cent cess), a rate identical to taxes that luxury cars attract under the GST. Hybrid vehicles earlier attracted taxes of about 30 per cent and in markets like Delhi it was even lower due to a differential in value-added tax. Industry body Siam 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.