Outdated GST Rates for Passenger Vehicles Need Overhaul: JSW MG Motor India CEO Calls for Green Policies and Lower Import Bills

New Delhi: The current GST rate for passenger vehicles in India is outdated and needs to be revised to reflect new developments in the auto industry, according to Rajeev Chaba, CEO Emeritus of JSW MG Motor India. He believes the government should consider factors like vehicle emissions, import cost reduction, a sustainable local supply chain, and the total cost of ownership when forming auto sector policies.

Speculation on Hybrid Vehicle Tax Incentives

There is speculation that hybrid vehicles might receive tax incentives in the upcoming Union Budget. Chaba suggested that only strong plug-in hybrids, capable of running as battery electric vehicles independently from the internal combustion engine, should receive these benefits.

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“Earlier, we focused on cars under four meters in length and engines of 1.2-liter or 1.5-liter capacity for GST structure. Those days are gone,” Chaba said in an interview.

Current GST Rates Overview

Currently, electric vehicles (EVs) have a 5% GST, hydrogen fuel cell vehicles 12%, and passenger vehicles (petrol, CNG, LPG) up to 4 meters in length and up to 1,200cc engines have a 28% GST with a 1% compensation cess. Diesel passenger vehicles (PVs) up to 4 meters in length and up to 1,500cc engines have a 28% GST with a 3% cess. PVs with engines over 1,500cc are taxed at 28% with a 17% cess, while SUVs over 4 meters in length with engines over 1,500cc and ground clearance above 170 mm have a 28% GST and a 22% cess. Hybrid PVs up to 4 meters with up to 1,200cc petrol engines or up to 1,500cc diesel engines have a 28% GST without any cess, whereas hybrid PVs above these limits have a 28% GST with a 15% cess.

Proposing a New GST Approach

Chaba proposed that GST rates should focus on what benefits the country, such as environmental friendliness, technology that saves import costs, local supply chains, and low ownership costs. “Based on these criteria, EVs should have a 5% GST. If CNG is good, it should have some preference over petrol and diesel. Strong hybrids should have more preference over petrol, with EVs being the best option,” he said.

Industry Reaction and Incentives for Hybrids

Chaba acknowledged that not everyone in the Indian auto industry would agree with this proposal but said it would help manufacturers focus on their chosen technologies. Regarding incentives for hybrid vehicles, Chaba stated they should only be for strong plug-in hybrids that can run independently as battery electric vehicles, not for those using batteries only to improve fuel efficiency.

Upcoming Product Launches

JSW MG Motor India plans to launch five new products in the next year, with two being premium models and the rest mainstream. The first product is expected to launch in the September-October festive period.

Chaba predicted a 7-8% growth for the industry rather than 2-3%.