Nitin Gadkari withdraws his GST remark on diesel

NEW DELHI: Road transport minister Nitin Gadkari literally created a flutter in the car industry on Tuesday by saying that he would recommend an additional 10% GST on diesels, before withdrawing his own statement after it had created a furore that saw share prices of companies such as Mahindra & Mahindra and Tata Motors crash almost immediately.
As soon as Gadkari made the statement, Mahindra’s stock declined by around 4% on BSE. It recovered after his clarification and closed the day down 2% at Rs 1,553. Tata Motors’ stock also crashed by a little under 4%, but recovered later to close the day at Rs 621after falling 2.2%.
“Pollution is a serious problem, and we are also importing the fuel. I will request the finance minister to add an additional 10% GST on diesel engines… Reduce diesel production, otherwise I will increase the tax,” the minister said in a hall packed with representatives from the industry as companies, such as, Tata Motors, Mahindra & Mahindra, Hyundai, Kia, Toyota, and Mercedes-Benz were left shocked.

The minister – who asked the industry to go for relatively-cleaner products such as electrics, flex fuel and CNG vehicles – did not stop in the diesel bashing as he continued address to the industry at the annual convention of industry body Siam. “Say bye bye to diesel in whatever way possible. If not, we will increase tax so much that it will be difficult for you to sell.”
Before the industry could digest the statement as the minister moved out of the venue, Gadkari took a U-turn, and that too within half an hour. “There is an urgent need to clarify media reports suggesting an additional 10% GST on sale of diesel vehicles. It is essential to clarify that there is no such proposal currently under active consideration by the government,” he said through his handle on X (formerly Twitter).
The minister, however, added in his statement that the industry should look at “greener alternative fuels” to check the menace of pollution. “In line with our commitments to achieve Carbon Net Zero by 2070 and to reduce air pollution levels caused by hazardous fuels like diesel and rapid growth in automobile sales, it is imperative to embrace cleaner and greener alternative fuels. These fuels should be import substitutes, cost-effective, indigenous, and pollution-free.”
The share of diesel cars has been falling due to several strictures passed against the fuel by various governments, including in Delhi-NCR region, where they have 10-year lifespan against 15 years in other places.
The minister’s statement, however, ended up rattling the industry as companies said any additional tax on any fuel type will slow down the industry. “We are already one of the most taxed industry and diesel SUVs are currently taxed at around 45%, which is extremely high. How can the minister even talk about taxing us more when we are complying with all the laws that have been stipulated for the industry,” a CEO of a leading car company said, requesting anonymity.
Another official said it is “wrong to demonise diesels”, especially as they meet all the emission standards as stipulated by the government. “We have spent crores of rupees on upgrading our diesel engines to BS6, and subsequent standards. How can the government talk about burdening us with further duty even when the fuel is compliant with strict emission norms? What happens to our investments?”