Diesel Car Sales in India Face Uncertain Future as Tax Hike Looms

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In a cautionary message directed at Indian automobile manufacturers, Union Transport Minister Nitin Gadkari made it clear that the government may have to consider increasing taxes on diesel vehicles and impose measures to impede their sales unless manufacturers voluntarily limit their production.

During his address at the 63rd Annual SIAM convention in New Delhi, Mr. Gadkari expressed, "It's time to bid farewell to diesel production. We urge you to cease manufacturing diesel vehicles, or else we will be compelled to substantially raise the taxes to the point where selling diesel cars becomes increasingly challenging."

Initial reports hinted at the possibility of a potential tax hike of up to 10%. However, the minister later clarified that there was currently no concrete proposal for such an increase in consideration.

He emphasized the need to clarify media reports regarding a purported additional 10% GST on diesel vehicle sales. He stressed that no such proposal was actively being considered by the government. Mr. Gadkari also underscored the government's commitment to achieving Carbon Net Zero by 2070 and reducing air pollution linked to harmful fuels such as diesel. He highlighted the rapid growth in automobile sales and the importance of adopting cleaner, more sustainable alternative fuels that are cost-effective, domestically produced, and environmentally friendly.

Currently, automobiles are subject to a 28% GST along with an additional cess ranging from 1% to 22% depending on the type of vehicle. SUVs incur the highest tax, consisting of a 28% GST combined with a 22% cess.

Labeling diesel as a "hazardous fuel," the minister drew attention to India's heavy reliance on fuel imports due to the surging demand. He noted a significant decline in the number of diesel cars, which has dropped from 53% in 2014 to just 18% today, characterizing this shift as a positive development.

Mr. Gadkari urged car manufacturers to realign their production strategies to prioritize environmentally friendly fuels such as ethanol and green hydrogen. This strategic shift could pave the way for the increased adoption of electric vehicles on Indian roads.

Notably, automakers like Maruti Suzuki and Honda have already ceased the production of diesel passenger vehicles, signaling a shift towards more eco-friendly options.