The Goods and Service Tax (GST) Council has decided to reduce taxes on Electric Vehicles and Charges from 1st August 2019.
- Tax on Electric Vehicles reduced to 5% from the current 12%
- Tax on Charges for Electric Vehicles reduced to 5% from the current 18%
GST Council has also approved the exemption from GST on the hiring of Electric Buses by local authorities.
The reduction in GST rates is aimed to boost the sale of Electric Vehicles in the Indian market and reduce the dependence on fossil fuels. The share of Electric Vehicles is minimal at the moment. The Government is trying to increase the production of Electric Vehicles and incentivise the customers for its adoption.
In India, around 30 lakh four-wheelers are sold every year, but Electric Vehicles share is anything between 10-15,000. Globally, the share of Electric Vehicles in the total sales is around 1 per cent, but in Norway, the share is in the double digits.
GST rate for petrol and diesel cars, on the other hand, are in the highest bracket of 28% plus cess.
The Indian Auto Industry has welcomed the move and responded –
Tarun Mehta, CEO and Co-founder, Ather Energy said, “The reduction of GST rates from 12% to 5% reduces the upfront cost of buying a vehicle by INR 8000-10,000. Compounded by the tax rebates offered in the Union Budget, today Electric Vehicles are an affordable upgrade from existing ICE options.”
“Along with the vehicles and chargers, a GST reduction on using public charging network should have also been considered. Though today we offer free charging for all-electric 2Ws and 4Ws, consumers will have to begin paying 18% GST in the coming months. Offering preferential electricity rates along with a lowered GST rate will make owning EVs more affordable and will increase adoption.”
He further added, “As a manufacturer, we would like the Centre to review the current taxation framework applicable on raw material and the final product. There is an inherent inverted duty structure as the GST input on raw material and other overheads are on average of 18 % wherein the output is now going to be pegged at 5%. This structure results in significant working capital blockage. Even with the existing GST inverted duty refund framework in place, there is a working capital blockage on the overheads and capital investments. A comprehensive GST refund structure of Electric Vehicle manufacturers or a reduced GST liability on the raw material should be assessed for seamless cash flows in the long run,”
Pankaj Tiwari, India Business Head, Avan Motors said, “Ensuring continuity in Govt’s commitment to accelerate the growth of sustainable mobility ecosystem in the country, GST Council’s decision will bring an end to the wait-and-watch stance that the industry was taking so far for the reason of lack of clarity on the future policy initiatives towards EVs and the related support system. What started with FAME II, followed by the budgetary benefit by the Finance Minister extending tax benefit of Rs 1.5 lakh on the interest paid on the loans taken for the purchase of the Electric Vehicles, the GST Council’s decision to reduce the rate on Electric Vehicles and chargers to 5 per cent has clearly established the Government’s intention of a long term view towards the segment. Reciprocating to these announcements, we assure of our commitment aligned with such initiatives by bringing state of the art products and technologies to the market.”
Jeetender Sharma, Founder & MD, Okinawa Autotech Pvt Ltd. said, “We welcome the GST Council’s decision to slash the GST on electric vehicles to 5 per cent from 12 per cent and reduced tax rate on EV chargers from 18 per cent to 5 per cent. The 7 per cent tax reduction on EVs along with the tax rebates proposes in Union Budget will definitely encourage the shift towards electric mobility. These positive steps by Government have created a positive ecosystem for faster adoption of electric vehicles in India.”
Mahesh Babu, CEO, Mahindra Electric, said, “We thank the GST council for quickly ratifying and implementing the tax cut on Electric Vehicles that was announced during the budget earlier this month. Mahindra will pass on these benefits to customers across our entire product range with immediate effect. This tax cut along with the strong FAME II policy will see the adaption rate in EV going up drastically with a boost to India’s last and first-mile mobility.”
Rajan Wadhera, President, Society of Indian Automobile Manufacturers, said, “Government’s vision of increasing electric mobility in the country has been acknowledged by GST council by significantly reducing GST rate on Electric Vehicles. We are thankful to the GST council for accepting these recommendations which were proposed by SIAM in our white paper which was released last year to promote the growth of electric vehicles in India.”