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Electric vehicles get a push as GST Council slashes tax rate by 7 per cent

The new GST rate on EVs will be effective from August 1, the finance ministry said in a statement after the 36th meeting of the GST Council.

Published: 27th July 2019 01:07 PM  |   Last Updated: 28th July 2019 11:13 AM   |  A+A-

An electric vehicle replenishing charge at a charging stations. (Photo | EPS)

By Express News Service

NEW DELHI:  For the second time in less than a month, the GST Council on Saturday decided to lower tax rates on Electric Vehicles (EV) and their chargers or charging stations, effective from August 1, 2019. 
The 36th meeting of the council held on Saturday recommended a reduction of duty on EVs and their chargers or charging stations to 5 per cent from 12 per cent and 18 per cent, respectively.

The council also made hiring of electric buses, with a carrying capacity of more than 12 passengers, by local authorities tax-free. The move, experts say, is set to reduce the upfront cost of buying such vehicles by Rs 8,000.

Welcoming the move, Tarun Mehta, CEO and co-founder of Ather Energy, which manufactures smart electric scooters, said, “The GST rate cut from 12 per cent to 5 per cent reduces the upfront cost of buying a vehicle by Rs 8,000-10,000 and thus plays a part in faster adoption of electric mobility. Compounded by the tax rebates offered in the Union Budget, today electric vehicles are an affordable upgrade from existing internal combustion engine options.”

The tax cut, which follows a slew of incentives announced in the Union Budget, is a big relief for the auto industry, which has been pushing for a tax boost to promote the sale of EVs at a time when higher cost of acquisition and inadequate infrastructure deterred people from looking at these vehicles. 

Experts, however, also expect a similar cut in spare batteries. “The industry now awaits the corresponding reduction of the 18 per cent GST in the spare batteries as it will help maintain the low running cost of EVs over their lifetime,” opined Sohinder Gill, director general, Society of Manufacturers of Electric Vehicles.
In another move that could significantly alter consumer behaviour in favour of EVs, the government is likely to hike the registration charges on petrol/diesel vehicles.

As of now, petrol and diesel-based automobiles attract GST at 28 per cent, besides a cess. However, due to the high cost of EVs, a lower duty can at best reduce the price gap between two kinds of vehicles, but the prices of EVs will still be higher.

The reduction in duty on EV and related accessories is set to help four-wheeler companies such as Hyundai, Mahindra, Tata and BMW (all of them have e-vehicle models) and Maruti-Suzuki, which will launch its e-vehicle next year. 

Meanwhile, the share of EVs in India is still diminutive now. Of nearly 30 lakh four-wheelers sold in the country every year, EVs contribute anything between 10,000-15,000; globally, the share of EVs in total sales is about 1 per cent, while in Norway, the share is even higher, in double digits. 

Last date extended
The GST Council also decided to extend the last date for enrolling under new composition scheme for service providers. Service providers (apart from restaurants) can now enroll for the new composition scheme, provided their annual turnover is up to I50 lakh.

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