India cuts GST on electric vehicles and charging stations

light weight electric vehicle

India’s Goods & Service Tax (GST) Council on Saturday decided to reduce the duty on all electric vehicles (EVs) and the charger for such vehicles.

GST rate on EVs in India will be reduced to 5 percent from 12 percent. Petrol and diesel based automobiles attract GST rate of 28 percent, besides a cess.

Lowering of GST will reduce the price gap between electric vehicles and petrol/diesel vehicles, but the prices of EVs will still be higher due to the high cost of EVs.

India’s Union Budget 2019-20 offered income tax benefit for EV buyers. Finance Minister Nirmala Sitharaman on July 5 said that the government will provide an additional income-tax deduction of Rs 1.5 lakh on the interest paid on loans taken for purchase of EVs. This amounts to a benefit of around 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle.

The GST Council also decided to lower the GST rate on the charger or charging stations for EV to 5 percent from 18 percent.

Hiring of electric buses — with carrying capacity of more than 12 passengers — by local authorities will be exempted from GST.

Reduction in GST on EV and related accessories will help four-wheeler companies such as Hyundai, Mahindra, Tata, BMW and Maruti Suzuki.

Two-wheeler companies such as Hero Electric, Revolt Intellicorp, Ather Energy, Kinetic Green, Tork Motors, 22Kymco and Log 9 Materials, will also benefit from the government’s move.

Nearly 30 lakh four wheelers are sold in India every year, and EVs contribute between 10-15,000. Globally, the share of EVs in total sale is approximately 1 percent, but in Norway, the share in the double digits.