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GST on electric vehicles reduced to 5%

Nizam Shaikh
Written by Nizam Shaikh

Earlier we reported that the Government’s think tank has proposed for mass electrification in the country to curb the rising pollution, especially in metro cities. To boost electric mobility in India the Government of India has decided to reduce the Goods and Services Tax levied on electric vehicles from 12% to 5%. 

The Governments move to reduce the tax is on electric vehicles is likely to encourage customer’s who want to buy electric vehicles but are repelled by the price tag. It is also important to note that the Government has also provided with an additional income tax deduction of INR 1.5 lakh on the interest paid on the loans to purchase the electric vehicle. It is also being speculated that the electric vehicle chargers are also likely to see a reduction in GST from 18% to 12%.

This budget sends a clear message to the automobile industry that the Government support clean electric vehicles and is likely to employ the mass electrification plan which includes the ban of sub-150cc internal combustion powered two-wheelers and three-wheelers in India. The Government has also hiked the prices of petrol and diesel fuel by adding excise duty and road and infrastructure cess, making petrol expensive by INR 2.42 paise and diesel expensive by INR 2.50 paise per litre in Mumbai. (Prices may vary in other states and metro cities). 

The Government of India already provides subsidy to electric vehicle manufacturers through the FAME II scheme and is also likely to exempt all-electric vehicles from the registration charges making them more affordable. The Ministry of Road Transport and Highway (MoRTH) has already announced last year that all-electric vehicles will receive green number plates which may be used for concession in toll and free entry in congested zones. 

The only major hurdle in the mass electrification plan is the lack of quick charging infrastructure in our country.