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GST reduction for Electric vehicles proposed

Written by Nizam Shaikh

Government of India is planning mass electrification of the vehicles in our country by banning electric two-wheelers and three-wheelers under the 150cc segment in the first phase followed by the four-wheelers and it wishes to accomplish this by the year 2030. Given that the infrastructure is not really ready yet, and the technology is still very expensive with low domestic production, the electric vehicles are still very expensive to buy.

To target that and boost electric mobility in the country, the Government of India may reduce the GST (Goods and Services Tax) levied on electric vehicles from 12% to 5% and the electric buses be exempted from tax in cities. Also, electric vehicle chargers will see a reduction in GST from 18% to 12%.

The Electric vehicle sector already receives subsidies under the FAME II scheme that provides manufacturers subsidy if the vehicle is domestically produced the slashed GST rate will further encourage EV sales which are very small as compared to the internal combustion engine powered vehicles.

The import tax on the EV parts has also been reduced to encourage localisation. The conventionally powered vehicles pay 28% GST and the Electric vehicles have 12% which is further proposed to be lowered and the move will also encourage less use of fossil fuels and help curb the increasing air pollution problems, that most metro cities are facing.

This could also supplement the Governments proposal to exempt electric vehicles from registration charges.