New Delhi: True to the promised made by Finance Minister Nirmala Sitharaman during the 2019 Union Budget speech and adhering to a longstanding demand of the electric vehicle (EV) industry, the central government has finally given a green signal to reduce Goods and Service Tax (GST) on EVs and EV chargers. The move is in line with the government’s goal to promote EVs to curb air pollution and cut down its fuel bill. The GST Council on Saturday decided to slash the tax rate on electric vehicles from the existing 12 per cent to 5 per cent. GST Council also reduced GST rate on EV Chargers from 18 per cent to 5 per cent. Along with reducing tax rates on EVs and EV chargers, GST Council has also approved exemption from GST in cases where local authorities hire electric buses, to give a boost to electric public mobility in cities. As per the Finance Minister, the new tax regime will be effective from August 1.
The 36th GST council decided to reduce GST rate on all EVs from 12% to 5%.
For more details: https://t.co/9T32blywp0@nsitharamanoffc @nsitharaman @ianuragthakur@Anurag_Office pic.twitter.com/C0Bq5t3Tf7
— Ministry of Finance (@FinMinIndia) July 27, 2019
Welcoming the decision of GST Council, Hardeep Singh Puri, Minister of Housing and Urban Affairs said on social media,
The reduction of GST on electric vehicles & EV Chargers and no GST on hiring of electric buses by local authorities will lend muscle to the challenge India has collectively mounted against the menace of pollution on several fronts.
EVs Become Cheaper But Still Costlier Than Their Fossil Fuel Counterparts
According to Kamlesh Mallick, Founder of PluginIndia.com, a community of EV users across the country,
Lowering GST will help EV manufacturers in cutting down production costs, which could further lead to a reduction in prices of electric vehicles.
However, due to the high cost of EVs, a lower duty, can only reduce the price gap between EVs and vehicles running on fossil fuels to some extent, but the prices of EVs will still be higher. For example, in case of the recently launched electric SUV, Hyundai Kona EV, which is currently priced at Rs. 25.3 lakh, after the tax cut it could get cheaper by up to Rs. 1.3 lakh but still The Kona would be about Rs. 9 lakh higher than the price of popular SUVs like Hyundai’s Creta which costs approximately Rs. 15 lakh. Similarly, about Rs. 60,000 is expected to be slashed from the price of Maruti’s electric WagonR which is currently priced at Rs. 12 lakh and is expected to be launched in 2020. However, the petrol counterparts of low-end mass cars like WagonR cost Rs.5-6 lakh, almost half of the price of low-end mass e-cars.
Tarun Mehta, CEO, Ather Energy, an electric two-wheeler manufacturing firm welcomed the move and said that in case of two-wheelers, the reduction of GST rates will cause a reduction in the purchase price by Rs. 8,000 to Rs. 10,000. This, according to Mr. Mehta will offer an affordable upgrade from the petrol scooters.
Mr. Mallick said,
The decision will encourage the retailers to sell more EVs and the customers too will buy because of very low running costs. But to increase domestic manufacturing, it is important that GST for EV components is reduced too.
Industry Welcomes GST Council’s Decision To Cut GST on Electric Vehicle
The Society of Manufacturers of Electric Vehicles (SMEV), a network of EV and EV component manufacturers in India welcomed the move to slash the GST. Sohinder Gill, Director General of SEMV said,
The Government is lately showing very clear intentions of promoting EVs and GST reduction is one such measure in line with the series of actions taken by the government in the last few months. We welcome the 7% reduction in GST as it will reduce the gap between the EVs and the fossil fuel Engine vehicles.
He further said that the EV industry now awaits the corresponding reduction of the 18 per cent GST on the batteries as it will help in maintaining the low running cost of EVs over their life with the owners are batteries need to be replaced after every five to six years. Jeetender Sharma, Founder & MD, Okinawa Autotech Private Limited which sells electric scooters said that tax reduction has built a positive environment for EVs and will help in faster adoption of EVs in India.
Mahesh Babu, CEO Mahindra Electric which is the manufacturer of the first electric car of India said,
We thank the GST council for quickly ratifying and implementing the tax cut on electric vehicles that was announced during the budget earlier this month. Mahindra will pass on these benefits to customers across our entire product range with immediate affect. This tax cut along with the strong FAME II policy will see the adaption rate in EV going up drastically with a boost to India’s last and first mile mobility.
Commenting on the move, Naga Satyam, Executive Director, Olectra Greentech, an electric bus manufacturing company said,
Reduction of GST on EVs and chargers and zero charge on rental of e-Buses by authorities are very positive move from the Government of India. This is one of the long standing requests of the Industry. This will definitely help us to pass on the benefit to the State Transport Units while quoting in the tenders.
Mr. Mehta said that the central government should review the current taxation framework applicable on raw material. He also urged the government to make the GST refund framework easier for manufacturers.
Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM) congratulated the GST council for the move but he highlighted that for automobile manufacturers to invest in EVs, there’s a need for a long-term roadmap. He said,
Government’s vision of increasing electric mobility in the country has been acknowledged by GST council by significantly reducing GST rate on electric vehicles. Over the years, this will help popularise electric vehicles and increase penetration in the country.
He also mentioned that the automotive industry is currently going through a difficult time and SIAM has requested for government intervention to stimulate demand so that the industry can turn around from the current difficulties.
Central Government’s Push To Popularise Environment-Friendly Electric Vehicles
With an aim to accelerate the adoption of green-mobility in India and to achieve the target of electrifying at least 30 percent vehicles on road by 2030, the central government has been taking various initiatives. Under the second phase of EV incentivising scheme Faster Adoption and Manufacture of (Hybrid and) Electric Vehicles (FAME) which was launched in March this year with an outlay of Rs. 10,000 crore, the government has targets to install 2,700 EV charging stations and have on the road more than 7,000 electric buses, 10 lakh electric two-wheelers, and 55,000 four-wheelers across the country.
Besides this, the customs duty has been exempted on certain parts of EVs to further incentivise e-mobility in the country. The centre has also additional income tax exemption of Rs. 1.5 lakh on the interest paid on loans taken to purchase EVs. To further push EV usage, the central government has called for installing green registration plate on EVs for distinct identity, exemption from permit requirement for EVs and allowing minors in the 16-18 year age group to ride e-scooters. To monitor the progress made the states, the Ministry of Road, Transport and Highways has recently asked all the states to send the details of the actions taken by them to promote EVs in their respective states by August 31.
Amitabh Kant, Chief Executing Officer of NITI (National Institution for Transforming India) Aayog acknowledged the various efforts of the central government and said on social media, “Driving clean air for citizens: Government has given a massive push for green mobility by slashing GST on EVs to a mere 5 per cent, no permit, no registration fee, FAME-2 scheme for EVs with outlay of Rs 10,000 crore, additional income tax deduction of Rs. 1.5 lakh on interest paid on a loan for EVs. Great!”
Driving clean air for citizens: Govt has given a massive push for green mobility by slashing GST on EVs to a mere 5%, no permit, no registration fee, FAME-2 scheme for EVs with outlay of Rs 10,000 Cr, addl income tax deduction of Rs 1.5 lakh on interest paid on a loan for EV.Gr8!
— Amitabh Kant (@amitabhk87) July 28, 2019
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