A government official said that since EVs are not sold in any significant volume, the rate cut and its impact on revenue wouldn't be a concern for the GST Council.
The GST Council on Thursday will consider the proposal to cut tax rate on electric vehicles (EVs) to 5% from 12% currently, a move that will align with the government’s push to make non-fossil fuel transport lucrative to buyers. The Council, chaired by finance minister Nirmala Sitharaman, would meet for the 36th time via video-conferencing.
The proposal to slash rates on EVs was referred to a committee of officials called ‘fitment committee’ for preparing recommendation. Apart from EVs, the fitment committee is likely to recommend concessional rates on electric chargers and hiring of EVs.
A government official said that since EVs are not sold in any significant volume, the rate cut and its impact on revenue wouldn’t be a concern for the GST Council. 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 Centre had introduced deduction of up to Rs 1.5 lakh for income-tax computation on interest payment of loans taken to purchase EVs. Archit Gupta, founder & CEO of ClearTax, said: “The government has shown clear intent with tax benefits in the direct tax law and there will be GST rate tweaking as well for EVs. Some more push is required for the rest of the eco-system to establish and, therefore, reduction of GST rate on batteries may also be on taken up. Since this is a video conferencing, agenda will be limited.”
Additionally, the Council is expected to finalise GST rate on lotteries, which was referred to the attorney general for legal opinion in the last meeting. Currently, a state-organised lottery attracts 12% GST, while a state-authorised lottery is levied with 28% tax.
Further, the Council could also consider tax structure for solar power projects. The Delhi High Court had in May asked the GST Council to review the taxation structure following industry petition. Earlier this year, the government had provided for a deemed valuation provision for solar projects, which provided for taxing 70% of a solar project contract value as goods – to be taxed at 5% – and the remaining 30% as services – to be levied with 18%. The solar industry had argued in the court that a fair goods-to-services ratio for the industry was 90 and 10.