A model poses beside a Toyota Camry Hybrid during the Bangkok International Motor Show in Bangkok. Photo: Reuters

India’s recent indirect tax reform, goods and services tax (GST), has delivered a body blow to the fledgling hybrid car sector in the country, which was gradually finding acceptance among buyers.

As per the GST norm, hybrid vehicles have been clubbed with luxury cars and will be taxed 43% (including a 15% cess). Hybrid vehicles earlier attracted taxes of about 30%.

The Society of Indian Automobile Manufacturers had approached the government with a request to bring down the tax rate on hybrid vehicles from 28% to 18% and do away with cess.

However, the finance ministry on Thursday ruled out lowering cess on hybrid luxury cars. A key finance ministry official said there would not be any downward revision in GST rates or cess for hybrid cars, reports Business Standard.

The demand for hybrid cars in India fell after GST came into force on July 1, when companies raised prices by as much as 20% to pass on the tax burden to customers.

The demand for Toyota’s Camry Hybrid has dipped by about 30%. India’s biggest car maker Maruti Suzuki, the Indian arm of Suzuki Motors, also admitted to a ‘steep’ decline in the sales of hybrid versions of Ciaz and Ertiga models.

Though hybrid cars are pricier than conventional ones, certain high-end customers were gradually warming up to its environment friendly appeal. On the other hand in comparison with electric cars, which continue to be very basic in terms of engine power and cabin space, hybrid cars have features that are on par with conventional cars.

The new GST regime will have an adverse impact on its sales and companies which had plans to introduce hybrid models may put them on hold.