GST on Flex-Fuel Vehicles: Government’s Clear Stand
The issue of GST on flex-fuel vehicles was recently raised in Parliament, but the government confirmed that the GST Council has not recommended any rate reduction. Despite rising advocacy for cleaner fuel alternatives, the 28% GST plus applicable cess on such vehicles stands firm for now.
What Are Flex-Fuel Vehicles?
Flex-fuel vehicles (FFVs) are designed to run on more than one type of fuel — typically a blend of petrol and ethanol (E85). Promoted as an eco-friendly alternative to petrol/diesel vehicles, FFVs are gaining attention as part of India’s green mobility agenda.
GST on Flex-Fuel Vehicles: Current Position
As per the Reply in Lok Sabha on 22 July 2025, the government clarified:
| Parameter | Status |
|---|---|
| GST Rate | 28% |
| Compensation Cess | Additional 1% to 22% (based on type/engine size) |
| Recommendation for Rate Cut | No |
| GST Council Deliberation | Not taken up |
| Date of Official Reply | 22nd July 2025 |
Source: Ministry of Finance written reply, Lok Sabha Unstarred Question No. 3376
[External link: loksabha.nic.in]
Why No GST Reduction Yet?
According to the government’s statement, GST rate decisions lie solely with the GST Council. So far, the Council has not received or discussed any specific proposal to reduce the GST on flex-fuel vehicles.
Key reasons for inaction could include:
- High revenue dependency on auto sector taxation
- Lack of mass adoption of FFVs in India
- Uncertainty over ethanol-blending infrastructure across states
- Absence of cost-benefit impact studies under GST regime
How Does This Compare with EVs?
Flex-fuel vehicles often get compared with electric vehicles (EVs) in policy debates. Here’s a quick comparison:
| Vehicle Type | GST Rate | Cess | Govt Incentives |
|---|---|---|---|
| EVs | 5% | Nil | FAME-II, Income tax rebates |
| Flex-Fuel Vehicles | 28% | 1%–22% | No central GST incentives |
Legal & Policy Context
- Section 9 of CGST Act, 2017 provides the power to impose GST rates as notified by the Council.
- Compensation cess levied under GST (Compensation to States) Act, 2017 continues to apply to automobiles, including FFVs.
- No separate Notification has been issued under Notification No. 1/2017-Compensation Cess (Rate) or 1/2017-Central Tax (Rate) to address FFVs so far.
Expert View: A Missed Opportunity?
Many tax experts believe not lowering GST on flex-fuel vehicles could delay India’s ethanol transition goals, especially with the target of 20% ethanol blending by 2026.
“If the government wants faster adoption, tax incentives—like those given to EVs—must extend to other green technologies too,” says CA A. Suresh, indirect tax analyst.
Practical Insight for Buyers
If you’re planning to buy a flex-fuel vehicle:
- You won’t get any GST benefit for now.
- The total tax burden can reach up to 50% of the vehicle’s ex-showroom price (GST + cess).
- Consider total cost of ownership, including running costs of ethanol vs petrol.
Will the GST Council Reconsider?
There’s growing pressure on the Council to review this decision. With more auto manufacturers readying FFV models, the next GST Council meetings might bring it up again — especially if state governments push for green mobility incentives.
Summary
The Indian government clarified in Parliament that no GST reduction is approved for flex-fuel vehicles. The current tax rate remains at 28% plus cess. The GST Council has not discussed any proposal for change, despite the growing push for green mobility.
FAQs
Q1. What is the GST rate on flex-fuel vehicles in India?
A: The base GST is 28%, plus applicable compensation cess based on engine size and fuel type.
Q2. Has the GST Council proposed any rate cut?
A: No, the Council has not recommended any GST reduction for FFVs as of July 2025.
Q3. Are there any benefits like for EVs?
A: Unlike EVs (which are taxed at 5%), FFVs have no GST benefits or policy-linked subsidies yet.
Conclusion
The GST on flex-fuel vehicles remains unchanged. As India explores alternative fuels, the GST Council’s stance will play a critical role in affordability and adoption. Until then, buyers must plan for a higher tax burden.