GST Council meet: Electric vehicles get push despite crisis in auto sector

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July 28, 2019 4:10 AM

GST rate on EVs cut to 5% from 12%; tax on EV chargers down from 18% to 5%

GST Council meet, Electric vehicles, auto sector crisis, gst cut rates on electric vehicles, hybrid vehicles, ICE vehicles, Nirmala SitharamanFinance minister Nirmala Sitharaman along with revenue secretary Ajay Bhushan, MoS Anurag Thakur and others at the GST Council meeting in New Delhi on Saturday

The GST Council on Saturday cut rates on electric vehicles (EVs) to 5% from 12% in a move that is expected to align indirect tax structure on such vehicles with the government’s overall push to incentivise manufacturing of non-fossil fuels transport. The 36th Council, which was chaired by finance minister Nirmala Sitharaman, also cut rates on chargers and charging stations for EVs to 5% from 18%. These decision will come into effect from August 1.
Further, the apex decision-making body for GST exempted hiring of electric buses (of carrying capacity of more than 12 passengers) by local authorities from tax levy.

“The proposed reduction in the GST rates on e-vehicles coming on the back of the recent customs duty reduction on such vehicles and their parts signifies the government’s resolve to go green and reduce the carbon footprint,” MS Mani, partner at Deloitte India, said.

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A government official said since EVs are not sold in any significant volume, the rate cut and its impact on revenue would be only around Rs 50 crore annually. Vehicles running on petrol and diesel cars, and hybrid vehicles are already taxed at the highest rate of 28% along with an additional cess that varies from 1% to 15% depending on the make of the car.

In the budget presented earlier this month, the central government had introduced deduction of up to `1.5 lakh for income-tax computation on interest payment of loans taken to purchase EVs. However, the decisions have made conventional car makers look to government for incentives to boost dwindling sales.

Rahil Ansari, head, Audi India, said: “While these are great steps for the future, short-term measures supporting the overall industry, also the luxury segment, are required by the government. All players are struggling with declining sales, which, in turn, is leading to production cuts and may lead to job losses too. The draft notification on hiking registration for ICE vehicles is detrimental to the overall development.”

West Bengal finance minister Amit Mitra has written to the Union finance minister Nirmala Sitharaman asking if “the inordinate hurry” being shown to give a leg-up to the EV sector is indeed justified. Highlighting that the automobile industry has invested Rs 1.7 lakh crore to upgrade technology to meet higher emission standards, Mitra cautioned that an undue haste to create the infrastructure to replace fossil-fuel vehicles with EVs would have a “disastrous impact” on the auto companies. He pitched for a “well-thought-out, calibrated and phased transition to EVs” rather than “a sudden (policy) push” to these vehicles, which has few examples worldwide.

Mitra drew Sitharaman’s attention to the fact no country introduced EVs with a plan to completely ban fossil-fuel vehicles. EVs are yet 2.1% of all vehicles sold in the US, 2.5% in the UK and 4.4% in China, he noted. “If FAME 2 was a dampener, the GST reduction is certainly a bright spot in the National EV policy. The EV industry now awaits the corresponding reduction of the 18% GST in the spares batteries as it will help maintain the low running cost of EVs over their lifetime,” said Sohinder Gill, director general of Society of Manufacturers of Electric Vehicles (SMEV).

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