Nitin Gadkari Calls For 12 Per Cent GST On Flex-Fuel Vehicles To Curb Import Dependency

Union Minister for Road Transport and Highways, Nitin Gadkari, has urged state finance ministers to advocate for a reduction in goods and services tax (GST) on flex-fuel vehicles at the upcoming GST Council meeting.

“We need support from finance ministers of different states. The (Union) finance minister assured me that we will try to convince all the finance ministers," Gadkari said while speaking at the India Bio-Energy & Tech Expo organised by IFGE in New Delhi.

In his speech Gadkari highlighted his recent discussion with the Maharashtra finance minister, where he proposed reducing the GST on flex-fuel vehicles, including cars and scooters, to 12 per cent.

A flexible fuel vehicle (FFV), as its name implies, has the flexibility of running on more than one type of fuel. FFVs have an internal combustion engine and can operate on petrol as well as any blend of petrol with ethanol or methanol. Similar to conventional petrol vehicles, FFVs feature a single fuel tank, fuel system, and engine.

At present, vehicles powered by internal combustion engines, including hybrids, are subject to a 28 per cent GST, while electric vehicles are taxed at a lower rate of 5 per cent.

The sugar industry has been advocating for a 5 per cent GST on flex-fuel vehicles, similar to the rate applied to electric vehicles. However, some automobile manufacturers, who have heavily invested in electric vehicles, have reportedly opposed this rate-cut proposal in the past.

In March, the Ministry of Heavy Industries received multiple representations calling for a reduction in GST rates for flex-fuel vehicles. The GST Council, which includes finance ministers from different states along with Union Finance Minister Nirmala Sitharaman, will play a key role in this decision.

Gadkari pointed out that 85 per cent of the transport sector still relies on fossil fuels, leaving significant room for growth in the biofuels sector. In October 2023, the Ministry of Road Transport and Highways advised states to consider reducing road tax on flex-fuel vehicles, similar to the tax reductions for electric vehicles, as part of efforts to decarbonise the transport sector.