EVs to stay at 5% GST: Industry leaders say move will boost adoption

The GST Council has kept all EVs, mass market to luxury SUVs, under 5% tax, a step industry leaders say will spur sales and strengthen India's EV ecosystem

The government has maintained a uniform 5 per cent rate on electric vehicles (EVs) in the 56th meeting of the Goods and Services Tax (GST) Council, chaired by Union Finance Minister Nirmala Sitharaman on Wednesday, amid speculations on how EVs would be taxed.

 

The Centre has decided to keep all EVs, whether mass-market or luxury sport utility vehicles (SUVs), under the 5 per cent GST slab without any additional cess.

 

Several industry leaders have welcomed the move that is aimed at increasing EV adoption among consumers.

Reforms will boost sales

Head of Audi India Balbir Singh Dhillon said on Thursday that the GST Council’s move to retain a low rate for EVs is a welcome step. "This brings much-needed clarity and makes our portfolio more accessible to our discerning buyers. Such reforms help stabilise the business environment and help devise strategies that benefit all stakeholders in the best possible manner," he said. 

 

The move is a progressive step that will have a significant impact on adoption, said Vasudha Madhavan, founder and CEO, Ostara Advisors. "By removing the tax disparity between smaller EVs and larger SUV models, the policy creates a level playing field, improves affordability, and encourages greater consumer choice," Madhavan said.

 

"It is also expected to keep upfront costs low for customers while accelerating market growth. This will not only boost sales across segments but also reinforce confidence among manufacturers and investors in India’s long-term commitment to sustainable mobility. Importantly, it will also encourage our automotive component manufacturers to build a full-fledged EV component ecosystem in India," Madhavan added.

 

Even the two-wheeler EV industry hailed the government's move to keep the EV rates unchanged.

 

Commenting on the rate cut, Ajinkya Firodia, vice-chairman, Kinetic India, said, "We welcome this very positive and timely move by the government. The GST rate cut will give a strong boost to the economy in an unprecedented manner. Essentials, including food, automobiles, and several other key sectors, have been rightly covered under this decision. "

 

Firodia also requested the government to keep the EV sector in 'special focus'. He said, "To ensure higher penetration of EVs, especially two-wheelers, we urge the continuation of supportive schemes so that this transformative sector does not face any adverse impact. EV adoption is critical for India’s sustainable growth and competitiveness".

EV adoption in India

EVs in India are currently subject to a 5 per cent GST rate, which is significantly lower than that of traditional vehicles. EV owners also benefit from lower or waived road tax in many states, like Delhi and Maharashtra, and are exempt from the green tax and Pollution Under Control (PUC) certificate requirements.

 

According to the data available on Vahan portal, the share of EVs in the four-wheeler passenger segment inched up to 4.8 per cent in July from 4.6 per cent in June. Tata Motors led the market with over 39 per cent share, followed by JSW MG Motors and Mahindra & Mahindra. Here's how the EV market performed in July:

• Electric two-wheelers: Fell to 1,02,924 units in July from 1,05,931 in June
• Electric rickshaws: Rose to 39,792 units from 35,364
• Electric three-wheelers: Increased to 20,448 units from 16,329
• Electric four-wheelers: Grew to 15,437 units from 13,921
• E-carts: Almost flat at 6,813 units vs 6,849
• E-buses: Declined to 361 units from 531
• E-goods carriers: Jumped to 875 units from 617