Nitin Gadkari Says May Urge Finance Ministry To Consider 10% Additional Pollution Tax On Diesel Vehicles

Nitin Gadkari said that he has drafted a letter and intends to meet with Finance Minister Nirmala Sitharaman meeting to request the GST hike on diesel engine vehicles

In a bid to reduce pollution from diesel vehicles in India, the world's third largest car market, the government plans to propose imposing an additional 10 per cent tax on diesel engine vehicles as "pollution tax", news agency Reuters reported on Tuesday. Union Road Transport Minister Nitin Gadkari on Tuesday said that he will make the proposal to the finance minister later in the day. The minister said that he has drafted a letter and intends to meet with Finance Minister Nirmala Sitharaman meeting to request the GST hike.

Gadkari, who was speaking at the 63rd Society of Indian Automobile Manufacturers (SIAM) convention in New Delhi, said, "Say bye to diesel soon, otherwise we will increase so much tax that it will become difficult for you to sell these vehicles."

Shares in Indian auto companies Tata Motors, Mahindra and Mahindra, and Ashok Leyland fell between 2.5 per cent and 4 per cent after the minister's comments.

However, Gadkari later in the day in a clarification rejected claims of news reports suggesting an additional 10 per cent  GST on the sale of diesel vehicles.

In a tweet, he said, "It is essential to clarify that there is no such proposal currently under active consideration by the government. 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," the minister tweeted.

Most of the commercial vehicles in the country currently run on diesel. In the passenger vehicle segment, various carmakers including Maruti Suzuki India and Honda have already stopped manufacturing diesel cars. Gadkari said the contribution of diesel cars has already come down drastically in the country and the manufacturers need to stop selling them in the market.

Terming diesel as a hazardous fuel, he noted that the country has to import the fuel to meet the demand.
"Say goodbye to diesel... Please stop making them, otherwise we will just increase the tax so much that it would become difficult to sell diesel cars" Gadkari said.

He said he will propose additional GST on diesel-powered generators as well. Automobiles are currently taxed at 28 per cent GST, with additional cess ranging from 1 per cent to 22 per cent depending on the type of vehicle.

SUVs attract the highest GST at the rate of 28 per cent along with a compensation cess at 22 per cent. Gadkari also asked the industry to focus on environment-friendly alternative fuels like ethanol. He also asked the industry to focus on green hydrogen.

This report has been updated to reflect Union minister Nitin Gadkari's clarification that no proposal to impose 10% additional GST on diesel vehicles in active consideration.

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