Indian Government Reduces GST Rate on Electric Vehicles

The GST council has officially reduced the goods and service tax on electric vehicles. Earlier, the GST rate on EVs was 12% but now it has been cut down to 5%. The proposal was announced by Union Finance Minister Nirmala Sitharaman at the Union Budget FY2020.

The proposal has now been accepted by the GST council. The reduced rates will also be applicable to the electric vehicle chargers. The hiring of electric buses by localites has also been included in GST exemption. The reduced GST rate will be applicable from August 1.

The government’s main motive is to ensure mass electrification of two-wheelers under 150cc by the year 2025 and also to push the sales of the electric vehicles in the Indian market. This decision by the government of India has been supported by the Society of Indian Automobile Manufacturers (SIAM).

The president of SIAM, Rajan Wadhera, reviewed the decision and said that the GST Council appreciates the Government’s idea to initiate electric mobility in India and thus the cut down in prices.

The president also thanked the council for accepting the recommendations that were proposed by the SIAM in their white paper that were put up last year to boost the sales of EVs in India. He also emphasised on the currently ongoing tough phase of the automotive industry and requested the government to take necessary actions to process demands.

The CEO and co-founder of Ather Industry, Tarun Mehta, also appreciated the government’s move and said that the decision is going to prove fruitful in boosting sales of the electric vehicles in India and the decision of the council is going to have a positive impact.

He added to his statement and said that the current framework of the taxation system applicable to raw materials and final products needs to be reviewed. He focused on the inherent inverted duty structure that applies an 18% GST on the raw materials whereas the final products have a GST of 5%. This causes a capital blockage which needs to be solved for the future.