Nitin Gadkari Advocates for a 10% Additional GST on Diesel Vehicles, Urges Nirmala Sitharaman to Consider

In a significant move aimed at accelerating the transition towards cleaner and more sustainable transportation, Union Minister for Road Transport and Highways, Nitin Gadkari, has revealed plans to advocate for an additional 10% Goods and Services Tax (GST) on diesel engines and vehicles. Speaking at the 63rd Society of Indian Automobile Manufacturers (SIAM) Convention, Minister Gadkari outlined his intent to request Finance Minister Nirmala Sitharaman to consider this proposal. This article provides a comprehensive overview of this proposed initiative and its potential impact on the Indian automotive landscape.

Union Minister for Road Transport and Highways, Nitin Gadkari, has taken an assertive stance in his pursuit of a greener and more environmentally responsible transportation landscape in India. In a recent announcement, Minister Gadkari disclosed his intent to request Finance Minister Nirmala Sitharaman for a 10% Goods and Services Tax (GST) increase on diesel vehicles. Furthermore, he issued a stern warning to automotive companies, emphasizing that excessive taxes may force them to reconsider the production of diesel vehicles. This article provides a comprehensive overview of these developments and their potential repercussions.

Auto Stocks and Oil Marketing Companies Witness Negative Reaction to Gadkari’s Diesel Tax Proposal

In the wake of Union Minister Nitin Gadkari’s recent announcement proposing a 10% Goods and Services Tax (GST) increase on diesel vehicles, financial markets and investors responded swiftly. Shares of prominent automakers, including Ashok Leyland, Tata Motors, and Mahindra & Mahindra, all of which manufacture diesel vehicles, experienced a notable decline of up to 2.5 percent. 

Tractor Manufacturing Stocks Decline Amid Broader Market Reaction to Diesel Tax Proposal

In addition to the decline in shares of prominent automakers and oil marketing companies following Union Minister Nitin Gadkari’s proposal to increase the Goods and Services Tax (GST) on diesel vehicles, the negative sentiment spilled over to the tractor manufacturing sector. Shares of tractor manufacturing companies, including Swaraj Engines and Escorts Kubota, experienced a notable drop of nearly 3 percent.

Oil Marketing Companies Experience Significant Share Price Declines Following Diesel Tax Proposal

In the aftermath of Union Minister Nitin Gadkari’s proposal to raise the Goods and Services Tax (GST) on diesel vehicles by 10%, oil marketing companies in India witnessed a sharp decline in their share prices. Hindustan Petroleum (HPCL), Bharat Petroleum (BPCL), and Indian Oil (IOC), major players in the oil and gas sector, all saw their stocks trading at significant losses ranging from 3% to 4%.

Formal Proposal Pending: GST Council to Decide on Diesel Tax Hike

While Union Minister Nitin Gadkari’s proposal to increase the Goods and Services Tax (GST) on diesel vehicles by 10% has garnered significant attention, it’s important to note that a formal proposal has not been tabled as of yet. The ultimate decision on this proposal rests with the GST Council. Meanwhile, Minister Gadkari has underscored India’s commitment to environmental sustainability and alternative fuels, highlighting the country’s recent entry into the Global Biofuels Alliance during the G20 Summit.

Minister Gadkari Stresses Importance of Alternatives to Diesel and Calls for Industry Action

Union Minister Nitin Gadkari has reiterated the Indian government’s commitment to alternative and biofuels as a response to the country’s significant challenge of importing 89 percent of its crude oil. Prime Minister Narendra Modi has accorded the highest priority to these sustainable energy sources. Gadkari has also emphasized the necessity of phasing out diesel engines, citing the hazards of diesel as a fuel and its impact on the nation’s import bill. During his address, he encouraged the automotive industry to transition to electric vehicles (EVs) and alternative fuels. Additionally, he urged the industry to support vehicle scrapping and requested financial concessions while discussing a potential GST hike on diesel.

Challenges of Diesel Dependency:

Minister Gadkari highlighted the challenges posed by India’s heavy reliance on imported crude oil. The high import percentage places a significant economic burden on the nation. Therefore, the government is actively promoting alternative and biofuels as a sustainable energy solution.

Phasing Out Diesel:

Gadkari firmly reiterated his stance on phasing out diesel engines, emphasizing the hazardous nature of diesel fuel and its adverse impact on the country’s import bill. He urged the industry to take the initiative to transition away from diesel, suggesting that diesel vehicles could face consequences similar to those witnessed during the transition to Bharat Stage IV (BSIV) emission norms.

Push for Electric Vehicles:

The Minister highlighted the importance of electric vehicles and alternative fuels. He mentioned that companies that failed to transition to EVs in a timely manner have seen a drop in market share. Gadkari emphasized that making the appropriate decisions and timing are critical for the auto industry’s success in adapting to changing energy trends.

Scrappage and Financial Concessions:

Gadkari appealed to the industry to support vehicle scrappage initiatives and requested the finance ministry to provide financial concessions to encourage this practice. Such measures aim to retire older, polluting vehicles and replace them with more environmentally friendly options.

GST Hike Proposal:

The proposal for a GST hike on diesel vehicles is in line with the government’s environmental objectives and is part of its efforts to reduce the environmental impact of transportation.

Industry’s Contribution and Challenges:

Vinod Aggarwal, President of the Society of Indian Automobile Manufacturers (SIAM), highlighted the automotive industry’s substantial contribution to India’s GDP and manufacturing sector. He noted growth in the industry over the past two years but also highlighted challenges, particularly in the entry-level car and two-wheeler segments.