GST On Electric Vehicles Might Be Reduced To 5% To Help Bring Costs Down

Indian government is making sustained efforts to propel the electric vehicle (EV) industry in the country and a new move in line with this might be related to the GST applicable on these EVs. Recent reports reveal that the centre is now planning to reduce the GST on EVs to 5%, down from the current 12% on each unit.

The proposal will be discussed in the meeting of the GST council scheduled for June 20, mentions a report by ET. The report quotes a government official saying ¡°There is a proposal to cut tax rates on EVs among other issues,¡± citing it as a source for the update.

If and when the lower GST rates on EVs are brought into effect, the move will encourage global automobile manufacturers to bring in their EV offerings to India. With more EV options in the market, the end users are gradually expected to shift to an EV ecosystem, thus bringing down the vehicular emissions in the country in the process.

On the whole, the meeting to be held on June 20 is aimed at restructuring the GST rates for several industries in the country, which have experienced a drastic slowdown over the last five years. These include automobiles, textiles, micro, small and medium enterprises (MSMEs) as well as real estate, which now need a desperate boost to overcome the current fall.

(Representative Image: BCCL)

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Automobile industry, for instance, recently experienced the steepest drop in sales in the last 18 years as the passenger vehicle sales dropped by 21% in May. The effect - several manufacturers had to shut down some dealerships and even bring the production plants to a halt to manage the leftover inventory.

The pool of measures

Even with the decline in sales of vehicles in the country, the Indian government has been bullish in making the switch to EVs. Niti Aayog, the think tank of India, recently planned a road map for this transition, mentioning a total ban on the sale of petrol/ diesel two and three wheelers by 2023 and on such commercial vehicles by 2026. It even predicted complete ban on all non-electric vehicles by 2030.

As the for the state-controlled transportation, the centre recently allotted Rs 2,500 crore for the procurement of 5000 electric buses across the country. The state transport departments have now been directed to invite tenders for the same.

The government is even encouraging local production of electric vehicles, as the incentives offered on units built in India is substantially more than the imported ones. Going forward, the custom duty on such imported vehicles is expected to go even higher, while the subsidies for the locally built vehicles will also rise in tandem.