Budget wishlist: Mercedes-Benz India expects long-term GST plan on EVs

Currently, all electric vehicles (EVs) benefit from a concessional GST rate of five per cent, while vehicles running on internal combustion engines (ICE) are charged a 28 per cent GST

Mercedes-Benz India hopes the Budget on Thursday will give a long-term plan on the goods and service tax (GST) on electric cars for the auto companies to plan their investments accordingly, its Managing Director and Chief Executive Officer Santosh Iyer told Business Standard on Wednesday.

Currently, all electric vehicles (EVs) are charged a concessional GST rate of five per cent. Vehicles that run on internal combustion engines (ICE) are charged a 28 per cent GST.

The German carmaker, which dominates the luxury car market in the country, achieved a 10 per cent year-on-year (Y-o-Y) growth, reaching 17,408 units in 2023. It experienced a threefold increase in electric car sales from 2022 to 2023. The EV penetration in its overall sales has surged to four per cent in 2023, a significant rise from 1-1.5 per cent in 2022.

"When it comes to electrification, the current five per cent GST (on electric cars) is a great step. We would expect that the finance minister would not only continue with it but also give a long-term plan so that the OEMs (original equipment manufacturers) can plan their investments accordingly," Iyer said after the launch of two vehicles - entry-level GLA and top-level AMG GLE 53.

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Mercedes-Benz currently sells 24 models in India, with four of them being electric cars. One of these electric cars is manufactured in India at its Pune plant.

One of the key reasons for the auto industry's growth is the rapid growth of the road infrastructure in India. "Looking at that, we hope that the government continues to increase the outlay so that more and more roads and expressways are built and connectivity improves. This has a direct impact on sales," he noted.

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Iyer said that the auto industry has benefited from the overall growing economy. "Therefore, any announcements that go into making India a $5 trillion economy is always welcome, because there is a clear trickle-down effect," he noted.

Asked if the company is expecting any reduction in the import duties on cars, he replied, "About 97 per cent of the cars we sell in India are locally produced. At the same time, the CBUs (completely built units that are imported) are an important part of our brand... We expect policy continuity and no changes in customs duties.