In yet another move to promote a smooth transition to electrical vehicles (EVs), the Goods and Services Tax (GST) Council, headed by Finance Minister Nirmala Sitharaman, on Saturday, reduced the tax rate on electric vehicles from 12% to 5%. The Council, in its meeting held via video conferencing, also decided to lower tax on e-vehicle chargers from 18% to 5%. Also, local authorities hiring e-vehicles with a capacity to carry over 12 passengers will be exempt from GST. The changes will come into effect from August 1.
In yet another move to promote a smooth transition to electrical vehicles (EVs), the Goods and Services Tax (GST) Council, headed by Finance Minister Nirmala Sitharaman, on Saturday, reduced the tax rate on electric vehicles from 12% to 5%. The Council, in its meeting held via video conferencing, also decided to lower tax on e-vehicle chargers from 18% to 5%. Also, local authorities hiring e-vehicles with a capacity to carry over 12 passengers will be exempt from GST. The changes will come into effect from August 1.
With the cut in the tax rate, the e-vehicles will become cheaper but will still be priced higher than the vehicles run on fossil fuel. The petrol and diesel vehicles, apart from cess, attract 28% tax at present. Earlier in the Budget, the finance minister had announced an income tax deduction of Rs 1.5 lakh on interest paid on the loans taken to buy e-vehicle.
Auto players and tax experts have hailed the move.
Centre's EV push comes when NITI Aayog, a government thinktank, has strongly recommended a complete transition to EVs by 2030 and hoped such a move will expand India's clean fuel vision beyond two and three-wheelers in the country. Further, NITI Aayog has suggested a complete switch to the use of electric two and three-wheelers in India in a phased manner from March 31, 2023.
Green Vehicles Get A Big Push
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| Tax rate on electric vehicles (EVs) cut to 5% from the existing 12% |
| Tax rate on chargers or charging stations for electric vehicles slashed from 18 to 5% |
"The proposed cuts coming on the back of the recent customs duty reduction on e-vehicles and parts signifies the government's resolve to go green and reduce the carbon footprint," said MS Mani, partner at Deloitte.
"The move will reduce cost and make EVs and chargers affordable, apart from other indirect benefits," said the spokesman for the Society of Indian Automobile Manufacturers (SIAM) even while demanding governmental steps to arrest a slowdown in the automobile industry.
Cyril Amarchand Mangaldas Partner Mekhla Anand hoped that rate reduction would also provide the necessary motivation for increasing the manufacturing base in India.
PwC India Partner & Leader Indirect Tax Pratik Jain observed that from a policy standpoint it is clear that the government intends to promote EVs with Customs and income tax benefits proposed earlier this month in the Union Budget. ''While a few states have raised concerns on steep revenue fall, it is likely that the declining revenue would be compensated to a large extent by increased consumption as ultimate consumers have been incentivised to buy more. Further, exemption on the hiring of electric buses by local authorities is a step in the right direction, given the objective to make public transport go electrical,'' he said.
Jain also suggested that the Council may consider a rate cut for other vehicles including hybrid vehicles at least temporarily given the stress that the automobile sector is undergoing.
OPINION
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| Needed: An Ecosystem |
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The announcements made in the Union budget and now by GST Council will go a long way in promoting EVs. The key challenge is the lack of production of the lithium-ion battery as it constitutes a major portion of EVs’ cost. Unless efforts are made to bring down the cost and promote local production, this will remain a major impediment. The entire ecosystem of charging stations, (battery) swapping stations, service centres, remote monitoring and battery management system should be in place for early adoption of eco-friendly vehicles. —Sushil Jiwarajka, president, Infrastructure & Logistics Federation
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Union minister of roads and highways Nitin Gadkari early this month has allayed fears about the ban on petrol and diesel vehicles but asked the automobile industry to quickly shift to EVs and biofuel.
The government has viewed that the adoption of EVs by the common people will come as a natural progression, and automobile manufacturers may eventually find it unprofitable to make vehicles running on petrol and diesel.
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