Tesla is planning to launch its electric cars in India. The American technology brand is demanding that the Indian government relax the import duties to be able to better compete in the Indian market. However, reports suggested that the government is not considering revamping the tax structure. The auto industry in India was also divided with the opinion on the matter. But a media report now suggests that the government in India is currently evaluating the slashing of import duties on electric vehicles.
Revisions in the Tax Structure
In the Indian market, completely built passenger cars are taxed at 60% if the value is under the USD 40,000 mark. Over the government levies USD 40,000, with 100% tax. The system also imposes tariffs on fully built units irrespective of the fuel type. According to reports, Tesla is asking the government to revise the import duty to 40% on electric vehicles. Sources report that the government is also planning to reduce the taxes from 60% to 40% on electric vehicles under the value of USD 40,000 and 60% from 100% on electric vehicles over USD 40,000. Reports suggest that the discussions are still going on, and the revisions are not final yet.
Contradiction with Local Manufacturing Initiatives
While electric vehicles contribute only a fraction of annual automobile sales, currently, the segment is booming, and new manufacturers have also entered the space to get a slice of cake. The government of India is also providing considerable subsidies to manufacturers locally producing electric vehicles. The subsidies help encourage local manufacturing and boost the economy internally. But slashing taxes on the import of electric vehicles may defeat the government FAME2 initiative.
Two Sides to a Coin
However, since only a handful of premium manufacturers import electric vehicles via the CBU (Completely Built-Up) route, local manufacturers still objected when Mercedes-Benz and Audi tried to lobby to reduce taxes. According to reports, finance and commerce ministries are still discussing the tax revision and how it will hamper local manufacturers before a decision comes through. The government is also likely to temporarily offer tax relief on the import taxes if the manufacturers promise to start local manufacturing and benefit the local economy.