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India slashes tax on electric vehicles to 5% from 12%

Electric car, charging

India slashed taxes on electric vehicles and chargers to 5% from a previous GST of 12% and 18%, respectively; local authorities will also be exempt from GST for hiring electric buses with capacity of over 12 people, the Finance Ministry said in a statement on July 27. The rates will come into effect on August 1, 2019.

The decision was taken on July 26 at a GST Council meeting chaired by Finance Minister Nirmala Sitharaman, and attended by Minister of State for Finance and Corporate Affairs Anurag Thakur, Revenue Secretary Ajay Bhushan Pandey, and other senior officials of the Finance ministry. Sitharaman had moved the GST council for this tax cut before the Union Budget was presented earlier this month.

Budget: Tax exemption for personal loans for EVs

In the Union Budget, the government had announced tax exemptions of up to ₹1.5 lakh for people taking a loan to purchase an EV. For this to be applicable, the loan has to be sanctioned between April 2019 and March 2023, and the individual must not already own an EV. Customs duty was exempted on certain EV parts, including e-drive assembly, on board charger, e-compressor, and charging gun. Sitharaman had said during the budget announcement that the government’s plan was to make India a hub of electric vehicle manufacturing, with large manufacturing plants for lithium storage batteries and solar electric charging infrastructure.

EV manufacturer Ather Energy will pass on benefit of tax cuts to the customers. This is expected to increase the demand for EVs, as it bring the vehicles’ cost closer to fuel-run vehicles.

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