Executive Summary:
The Ministry of Finance addressed a question in Lok Sabha regarding the reduction of GST on flex-fuel vehicles. The government is promoting alternative fuels, but the GST Council has not recommended a reduction in the GST rate for flex-fuel vehicles, which remains at 28%. The 52nd GST Council Meeting deliberated on the issue on October 7, 2023.
Key Points / Main Content:
Promotion of Alternative Fuels:
* The government is promoting the use of alternative fuels in vehicles through various measures.
* Oil marketing companies must install facilities for marketing at least one new generation alternative fuel at their retail outlets.
* MoRTH has notified emission norms to facilitate the use of alternative fuel vehicles.
* A concessional GST rate of 5% applies to ethanol and biodiesel supplied for blending with motor spirit and high-speed diesel.
* Blending of duty-paid petrol with ethanol and biodiesel with high-speed diesel is exempt from excise duty.
* Unblended petrol attracts an additional excise duty of Rs 2 per litre.
GST on Flex-Fuel Vehicles:
* The GST rate on internal combustion vehicles, including those using alternative fuels, is 28%.
* The GST Council deliberated on reducing the GST rate on flex-fuel vehicles during its 52nd meeting on October 7, 2023.
* The GST Council did not recommend any changes to the GST rate on flex-fuel vehicles.
Road Tax on Flex-Fuel Vehicles:
* MoRTH has requested state governments and union territories to consider exemptions or reductions in road tax for flex-fuel vehicles.
Impact Analysis:
Ministry of Finance:
* Impact: Responsible for addressing questions and implementing policies related to GST and alternative fuels.
* Action Required: Continue to address questions related to GST and alternative fuels.
GST Council:
* Impact: Decision-making body for GST rates.
* Action Required: Continue to assess and deliberate on GST rates for various sectors, including flex-fuel vehicles.
Ministry of Road Transport and Highways (MoRTH):
* Impact: Responsible for promoting alternative fuel vehicles.
* Action Required: Continue to promote alternative fuels and consider fiscal incentives for users.
State Governments and Union Territories:
* Impact: May need to consider exemptions or reductions in road tax for flex-fuel vehicles.
* Action Required: Consider MoRTH's request to provide fiscal incentives for flex-fuel vehicle users.
Oil Marketing Companies:
* Impact: Required to install facilities for marketing alternative fuels.
* Action Required: Install facilities for marketing at least one new generation alternative fuel at their retail outlets.
Automobile Industry:
* Impact: Affected by the GST rates on vehicles and incentives for alternative fuels.
* Action Required: Monitor government policies and adapt to changing regulations.
Consumers:
* Impact: Affected by the cost of vehicles and fuels, including GST and road tax.
* Action Required: Be aware of available incentives and regulations related to alternative fuel vehicles.
Key Entities Referenced
GST Council: A constitutional body comprising members from the Centre and State governments that makes recommendations on GST rates.
Ministry of Finance: The Indian government ministry responsible for finance and economy.
Ministry of Petroleum and Natural Gas: The Indian government ministry responsible for the exploration, production, refining, distribution, marketing, import, export, and conservation of petroleum, natural gas, petroleum products, and liquefied natural gas.
Ministry of Road Transport Highways MoRTH: The Indian government ministry responsible for the development and maintenance of the national highways network.
Electric Vehicles: Vehicles that use electric motors for propulsion, often mentioned in the context of reduced GST rates.
Flex Fuel Vehicles FFVs: Vehicles that can run on gasoline and ethanol or methanol blends, and the subject of discussion for GST rate reduction.
Compressed Natural Gas CNG: An alternative fuel mentioned in the context of being marketed at retail outlets.
52nd Meeting held on 07.10.2023: Meeting of the GST Council where the issue of reduction of GST rate on flex fuel vehicles was deliberated.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
LOK SABHA
UNSTARRED QUESTION NO. 1309
TO BE ANSWERED ON MONDAY, JULY 28, 2025 / SRAVANA 6, 1947
(SAKA)
REDUCTION OF GST ON FLEX-FUEL VEHICLES
1309. DR. C M RAMESH:
Will the Minister of FINANCE be pleased to state:
(a) whether the Government is promoting alternative fuel to be
used in vehicles;
(b) whether it is true that States are levying higher GST on flex-
fuel vehicle, thereby defeating the very objective of pushing
growth in automobile industry;
(c) whether any appeal/request has been made by the Government
to States to reduce GST on flex-fuels from the present 28% to 12%;
(d) if so, the details thereof;
(e) whether the Government is considering to reduce the above
duties to 5% as is being done in case of Electric Vehicles and 12%
in the case of hydrogen fuel cell vehicles;
(f) whether any discussion on the above issue has been held in the
GST Council; and
(g) if so, the details thereof
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) The government is taking many measures for promotion of
alternative fuels to be used in vehicles:
(i) Ministry of Petroleum and Natural Gas has revised the
guideline for granting authorization to market Motor Spirit and
High-Speed Diesel. The authorized entities and the public
sector Oil Marketing companies are now required to install
facilities for marketing at least one new generation alternate
fuels like Compressed Natural Gas (CNG), biofuels, Liquefied
Natural Gas (LNG), electric vehicle charging stations (EVCSs),
etc. at their proposed retail outlets within three years of
operationalization of the said outlet subject to the entity
complying with various other statutory guidelines.(ii) Ministry of Road Transport & Highways (MoRTH) has notified
emission norms to facilitate the use of various alternative fuel
vehicles, ensuring their compliance to standards. These norms
cover Ethanol-blended fuels, hydrogen, CBG, LNG and Electric
Vehicles (EV).
(iii) Based on the recommendation of the GST Council, a
concessional GST rate of 5% has been prescribed on ethanol
and biodiesel supplied to Oil Marketing Companies or
Petroleum refineries for blending with motor spirit and high-
speed diesel oil.
(iv) Blending of duty paid petrol with duty paid ethanol and duty
paid biodiesel with high- speed diesel has been exempted
from excise duty.
(v) Unblended petrol attracts an additional excise duty of Rs 2 per
litre.
(b) The GST rates are based on the recommendation of the GST
Council, which is a constitutional body comprising of member from
the Centre and State governments. Presently the GST rate
applicable on internal combustion vehicles is 28% irrespective of
the type of fuel used including alternative fuels.
(c) & (d) The GST rates are based on the recommendation of the
GST Council, which is a constitutional body comprising of member
from the Union and State governments/UTs. The issue of reduction
of the GST rate on flex fuel vehicles was deliberated by the GST
Council in its 52nd Meeting held on 07.10.2023. However, the Council
has not recommended any change in this regard. However, the
Ministry of Road Transport & Highways (MoRTH) has requested all
States Governments and Union Territories to consider exemption or
reduction of road tax on Flex Fuel Vehicles (FFVs) as a fiscal
incentive to users.
(e) to (g) The GST rates are based on the recommendation of the
GST Council, which is a constitutional body comprising of member
from the Union and State governments/UTs. The issue of reduction
of the GST rate on flex fuel vehicles was deliberated by the GST
Council in its 52nd Meeting held on 07.10.2023. However, the Council
has not recommended any change in this regard.
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