Why Gujarat government against promoting e-vehicles?

The Gujarat government might have created a climate change department and chief minister Narendra Modi might have scripted a book on climate change, but when it comes to sale of environment-friendly e-vehicles, the government has done little.

The whopping 14.5 % VAT on electric vehicles has applied brakes on promotion of these vehicles in the state.

All India, Gujarat’s VAT percentage on electric vehicles is highest. While Rajasthan, Punjab and Haryana do not levy any tax on e-bikes and e-cars, Delhi even offers subsidy on such non-polluting vehicles.

Just because of high taxes, electric car, Mahindra Reva, is not sold in Gujarat. “The electric car which is sold in Delhi for around Rs3.5 lakh, is priced at around Rs5 lakh in Ahmedabad. Because of high taxes, this e-car is expensive by almost Rs1.5 lakh in Gujarat.

So we are not interested in selling the non-polluting car at this high price,” said Pavan Sachdeva, GM (marketing), Mahindra Reva.

According to him, Delhi not only levies zero VAT on such vehicles, it also gives subsidy to buyers. “So Reva is sold in the range of Rs2.8 lakh to Rs3.5 lakh there,” he said.

If VAT rate is brought down in Gujarat, the sale of non-polluting vehicles will get a boost in the state, which will also check the emission levels.    

"The taxes on e-bikes are highest in Gujarat. This is a state where sale and use of such vehicles can be good, so if taxes are brought down, that will greatly help their promotion," said CEO of Hero Electric, Naveen Munjal. For more than a year, the association of electric two-wheelers and four wheelers has been writing to Gujarat government for reducing the VAT rate. "If state government cannot make it tax free, then it can reduce VAT from 14.5% to at least 4%. But in spite of several letters, there is no response from the government," said Sachdeva.

Some fear that the government is not bringing down the VAT as it is afraid that other automobile companies may start demanding relief in taxes. "When we approached the government to reduce VAT on e-bikes, the answer we got was 'other two-wheeler manufacturers would demand the same','' said Jaysukh Patel, managing director of Ajanta Group, which makes Oreva e-bikes.

Patel said that in Rajasthan, Delhi, Haryana, Punjab and Chandigarh, VAT on electric vehicles is zero. "Maharashtra, MP, UP and Karanataka levy 4% VAT on e-bikes. Tamil Nadu and Kerala levy tax of 12.5%. But Gujarat is the only state in the country, where VAT rate is 14.5%, which is highest in the country," said Patel. The director of Electrotherm Ltd, Shailesh Bhandari, believes if other states can levy zero tax, Gujarat can certainly bring down the rate. "VAT in Gujarat is the highest in the country," he said.