Auto stocks fall as Nitin Gadkari says ‘may have to propose additional 10% GST pollution tax for diesel vehicles’

India’s Road Transport Minister Nitin Gadkari on Tuesday pushed for green fuels, requesting people to shift away from polluting fuels like petrol, diesel. He further added in case, there continues to be excessive usage of diesel-run vehicles and generators, then he might consider proposing an additional 10% tax on them as ‘pollution tax’. Immediately after the announcement, auto stocks took a sharp plunge, including Maruti and Tata Motors.

Speaking at the 63rd Annual SIAM convention, Gadkari said, “I am going to handover a letter to the Finance Minister this evening stating that an additional 10 per cent GST be put on diesel-powered vehicles”

“We will increase tax on diesel to the extent it will be difficult to sell it,” he said adding, “Hope automobile industry will take suo moto initiative to cut down diesel usage”

The minister added he will make this proposal to the finance minister later in the day.

Further noting that diesel a highly hazardous fuel and makes the country dependent on imports, he adds, “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.

How the auto stocks reacted?

The comment did not go well for the automakers where the demand has shifted towards bigger utility vehicles like SUVs that are many a times run on diesel. At 12.30 pm, Maruti Suzuki was trading at ₹1,0462, down ₹72.90, or 0.69%; Tata Motors at ₹618, down ₹16.70, or 2.63%. Eicher Motors down ₹46.80, or 1.37%, at ₹3,357.65.

Commercial and bigger utility vehicles are largely run on diesel, meanwhile, some industrial machines and engines such as generators also use diesel.

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.