In a bid to boost adoption of electric vehicles in India and create adeuqate EV charging infrastructure, the government has brought down the taxes on EVs and chargers to 5 percent.
Earlier electric vehicle chargers attracted a duty of 18 percent, while EVs were in the 12 percent tax bracket. The nascent EV industry in the country had been asking for reduction in taxation to promote adoption of the green vehicles, along with encouraging new players to enter the ecosystem.
The GST Council meeting was said to be held with a single agenda, to discuss cutting down GST on electric vehicles. The decision was taken at the 36th GST Council meeting, which was chaired by the finance minister Nirmala Sitharaman.
Commenting on the GSt reduction, Sohinder Gill, Director General, Society of Manufacturers of Electric Vehicles ( SMEV), said: "The government is lately showing very clear intentions of promoting EVs and GST reduction is one such measure in line with the series of actions taken by the government in the last few months. We welcome the 7% reduction in GST as it will reduce the gap between EVs and the IC Engine vehicles. If FAME 2 was a dampener, the GST reduction is certainly a bright spot in the national EV policy. The EV industry now awaits the corresponding reduction of the 18% GST in the spare batteries as it will help maintain the low running cost of EVs over their lifetime."
Industry welcomes move
Tarun Mehta, co-founder and CEO, Ather Energy said: “The Union budget gave a much-needed push to the EV industry and the outcome of the GST Council meeting is even more welcoming. The reduction of GST rates from 12% to 5% reduces the upfront cost of buying a vehicle by Rs 8,000-10,000. Compounded by the tax rebates offered in the 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 percent 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.”
“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 percent. This structure results in significant working capital blockage. Even with the existing GST inverted duty refund framework in place, there is 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.”