In a move to make Electric Vehicles (EVs) attractive, GST council on Saturday approved rate cut on electric vehicles from 12 per cent to 5 per cent, and on EV chaegers from 18 per cent to 5 per cent, respectively. EV makers have said this will reduce the gap between EVs and internal combustion engine (ICE) vehicles.
Hiring of electric buses (of carrying capacity of more than 12 passengers) by local authorities was also exempted from GST. However, GST rate remained unchanged for petrol, diesel cars and hybrid vehicles. The proposed changes shall become effective from August 1, 2019, said the Finance Ministry.
The 36th GST Council Meeting, chaired by Finance Minister Nirmala Sitharaman, was held via video conferencing. As a result of GST cut, annual revenue loss for the government is estimated at around Rs 70-80 crore, say experts.
Responding to the development, Sohinder Gill, Director General, Society of Manufacturers of Electric Vehicles ( SMEV), said that the Centre had recently indicated that promotion of EVs and GST reduction was in line with the series of actions taken by the government in the past few months.
"If faster adoption and manufacture of electric vehicles (FAME) scheme was a dampener on the national EV policy, the GST reduction is certainly a bright spot. The industry now awaits the corresponding reduction of the 18 per cent GST on the spare batteries as it will help maintain the low running cost of EVs over their lifetime," he said.
S S Kim, MD and CEO, Hyundai Motor India has termed GST council’s decision as historic one. "The tax benefit will help create an ecosystem that will encourage faster mass adoption of EVs," he said.
“This strategic decision by GST council will further strengthen confidence of prospective buyers in the future,” he added.
Ayush Lohia, CEO, Lohia auto Industries, added that the Council's decision to reduce GST rates for chargers & charging stations would lead to faster adoption of electric vehicles.
"It was a long-pending demand by the industry and hopefully it will attract investments for EV. The policy is likely to kick-start the journey towards cleaner energy in the future. This decision will represent the next-generation in sustainable mobility and make them an attractive alternative to consumers. To promote e-vehicles, we propose a clear and realistic roadmap towards the adoption of EVs and expecting more positive steps from the government," he added.
EV manufacturers have been asking for a GST rate cut as the higher cost of acquisition and inadequate infrastructure were major bottlenecks for customers.
The share of EVs is negligible in India at the moment. The government aims to accelerate production of electric vehicles as well as its adoption by consumers through incentives. Sitharaman, in her 2019-20 budget had proposed an income tax deduction of Rs 100,000 on interest paid for EV loans.