India's Road Transport Minister Nitin Gadkari’s has clarified after comments on additional tax on diesel vehicles caused automobile sector stocks to fall. The minister said that if there continues to be excessive usage of diesel-run vehicles and generators, the government might consider levying an additional 10 per cent “pollution tax” on them.
He took the microblogging site X to say that the Indian government doesn’t have any such proposal under active consideration.
“There is an urgent need to clarify media reports suggesting an additional 10% GST on the sale of diesel vehicles. It is essential to clarify that there is no such proposal currently under active consideration by the government,” the Minister tweeted on X.
“In line with our commitments to achieve Carbon Net Zero by 2070 and to reduce air pollution levels caused by hazardous fuels like diesel, as well as the rapid growth in automobile sales, it is imperative to actively embrace cleaner and greener alternative fuels. These fuels should be import substitutes, cost-effective, indigenous, and pollution-free,” he added.
Earlier in the morning of 12 September, Gadkari spoke at the 63rd Annual SIAM convention where he also pushed for greener fuels and requested people to move away from fuels like petrol, and diesel.
“I am going to handover a letter to the Finance Minister this evening stating that an additional 10 per cent GST be put on diesel-powered vehicles. We will increase tax on diesel to the extent it will be difficult to sell it," Gadkari said, adding, "Hope automobile industry will take suo moto initiative to cut down diesel usage."
The comment did not go well with car manufacturers because consumer preference has changed in favor of larger utility vehicles like SUVs, many of which are powered by diesel. Tata Motors was trading at 618, down 16.70, or 2.63 per cent, and Maruti Suzuki was selling at 1,0462, down 72.90, or 0.69 per cent. At 3,357.65, Eicher Motors is down 46.80, or 1.37 per cent.
Diesel fuel is mostly used to power larger commercial and utility vehicles, as well as some industrial equipment and engines like generators.
Automobiles are under the 28 per cent GST slab, with an additional cess ranging from 1 per cent to 22 per cent depending on the type of vehicle. SUVs attract the highest GST rates at 28 per cent along with a compensatory cess at 22 per cent.
Nitin Gadkari’s comments come after PM Narendra Modi announced the formation of the Global Biofuels Alliance (GBA) during the G20 Summit. The GBA is aimed at promoting the adoption of biofuels and expanding bioenergy access in emerging economies.