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Nitin Gadkari wants Nirmala Sitharaman to impose an additional 10% GST on diesel vehicles

Union Minister Nitin Gadkari plans to request Finance Minister Nirmala Sitharaman to impose an additional 10 percent GST on diesel engines and vehicles. Speaking at the 63rd Society of Indian Automobile Manufacturers (SIAM) Convention, the Minister for Road Transport and Highways said, “I am requesting the Finance Minister to impose an additional 10 percent GST on diesel engines/vehicles. This is the only way to phase out diesel vehicles.”

Gadkari said he had drafted a letter and intends to meet Finance Minister Nirmala Sitharaman on Tuesday, September 12, to request the GST hike.

He went on to warn that the government would increase taxes so much that it would become difficult for companies to sell diesel vehicles. “Reduce diesel vehicle production or else I will increase tax,” Gadkari said.

Following Gadkari’s remarks, shares of automakers and oil marketing companies reacted negatively.

Shares of tractor manufacturing companies such as Swaraj Engines and Escorts Kubota were also down nearly 3 percent.

Shares of oil marketing companies like Hindustan Petroleum (HPCL), Bharat Petroleum (BPCL) and Indian Oil (IOC) also fell to the day’s low, trading with losses between 3 percent and 4 percent.

It is pertinent to note that a formal proposal has not been moved yet and the GST Council will have to take a call on the proposal.

“India imports 89 percent of crude oil, which is a significant challenge. Therefore, Prime Minister Narendra Modi has given the highest priority to alternate and biofuels,” he said.

Gadkari reiterated his stance on phasing out diesel engines and stated that it is a hazardous fuel that increases the import bill. “Diesel has to be phased out one way or another. The industry must take the initiative. Please say bye-bye to diesel or diesel vehicles will face the same consequences as BSIV,” he said.

He asked the industry why buses and trucks can’t run on ethanol all the while complimenting them for increasing focus on alternate fuels and electric vehicles.

“Seven years ago, I told companies to transition to electric vehicles, those who haven’t done so have seen a drop in market share today. Appropriate decision and timing are very important for the auto industry,” he said.

The minister also urged the industry to give concessions for vehicle scrapping and requested the finance ministry to offer some concessions.

Gadkari’s appeal for the GST hike on diesel comes just weeks after Union Minister for Petroleum and Natural Gas Hardeep Singh Puri told CNBC-TV18 about the Centre and state government’s plans to lower fuel prices.

SIAM President and the MD-CEO of VE Commercial Vehicles Ltd. Vinod Aggarwal, who also spoke at the event, said, “The auto industry is contributing 6 percent to GDP and 40 percent to manufacturing GDP. The industry has grown well in the last two years.”

Aggarwal highlighted that there is stress in the entry-level car and two-wheeler segment. “The industry is now worth over Rs 12 lakh crore. Growth in the industry can be better if issues at the entry-level are sorted out,” he said.

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