Demand for reduction in GST on hybrid and flex fuel vehicles

11-Jul-2024 02:03 PM

New Delhi. The apex body of cooperative sugar mills - National Federation of Cooperative Sugar Factories in its pre-budget memorandum (wish list or big list) has urged the Union Finance Minister to reduce the rate of Goods and Services Tax (GST) on hybrid and flex fuel vehicles (especially cars) from the current level of 28 percent to 5 percent.

Although hybrid vehicles run on regular petrol engine and battery, flex fuel vehicles are run on gasoline or 83 percent ethanol mixed fuel.

Ethanol is produced from the by-products of sugarcane (molasses and sugar syrup etc.) and is used as biofuel in flex fuel vehicles. 

According to the Managing Director of the Federation, this issue was not considered in the last meeting of the GST Council, so now it should be given a day in the Union General Budget.

The sugar industry wants that the same rate of GST (5 percent) should be applicable on hybrid and flex fuel vehicles as is applicable on electric vehicles. Earlier,

the Road Transport and Highways Minister had also urged the Finance Minister to reduce the GST rate on hybrid vehicles to 5 percent and 12 percent on flex fuel vehicles.

Oil Marketing Companies (OMCs) are currently reluctant to buy ethanol in large quantities, but after the reduction in GST rates, if the sale of flex fuel vehicles increases, then the sale of ethanol will also automatically increase and this can provide a lot of relief to the sugar industry.