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By Aditi Shah, Shivangi Acharya and Sarita Chaganti Singh
NEW DELHI (Reuters) -India’s trade department has backed lowering taxes on hybrid vehicles to help the transition to cleaner energy sources, following demands by Japanese car makers, five government and industry sources told Reuters.
It’s possible that the move will simply disappoint some local automakers.
In India, combined sales taxes and other sales taxes on hybrid cars go as high as 43%, depending on the length of the car, up to the maximum rate of 50% imposed on gasoline and diesel cars. India taxes electric cars (EVs) at just 5%.
“Hybrid vehicles are less polluting than diesel vehicles and there is merit in taxes on hybrid vehicles being somewhere between what’s levied on diesel vehicles and electric vehicles,” one of the government sources, who did not want to be named, told Reuters.
The move may simply be the outlook in India for Japanese automaker Toyota Motor, the world’s largest automaker, which has been pushing for months to cut taxes on hybrid cars, arguing that those cars are far less polluting than gasoline-powered cars.
India’s Ministry of Trade Promotion and Industry has asked the Ministry of Heavy Industry to “simplify taxation” on hybrid cars, two sources said.
Cess is an additional tax typically levied on the sale of products identified as “luxury goods” by New Delhi. Cess on hybrid cars goes up to 15% based on the size of the vehicle.
This resolution would ultimately require the approval of the Ministry of Finance. In a letter written last month to India’s Heavy Industry Secretary Kamran Rizvi, India’s Trade and Industry Promotion Secretary Rajesh Kumar Singh cited statements through a “foreign” automaker that hybrids They are subject to higher taxes than electric cars. The letter said India needed hybrid and electric vehicles to meet its climate goals and stakeholders were working in sync to achieve the targets, a government and industry official said.
The move, however, would be a departure from Prime Minister Narendra Modi’s government’s stance of strongly incentivizing electric cars. India aims to switch 30% of its fleet to electric cars by 2030. “Such policy changes will delay the transition to electric cars and hurt investment sentiment,” the industry official said. India’s electric car market is ruled by local players Tata Motors and Mahindra.
Japanese car markers including Honda Motor and Suzuki Motor’s India partner Maruti Suzuki, which has the largest market share, have publicly sought government support for hybrids.
(Reporting by Shivangi Acharya, Sarita Chaganti Singh and Aditi Shah; editing by Leslie Adler)