Latest Changes in GST on Electric Vehicles in India: Key Updates and Incentives
The Goods and Services Tax (GST) on electric vehicles (EVs) in India has undergone significant changes, bringing both relief and incentives for various segments of the automotive market. As of August 1, 2019, the GST rate on EVs has been slashed from 12% to 5%. This reduction marks a crucial step towards making electric vehicles more accessible and affordable for consumers in India.
Electric Vehicles and the GST Hike
Until recently, the GST on electric vehicles was set at 12%, making them more expensive compared to internal combustion engine (ICE) vehicles, which carried a GST of 28%. Consumers and industry officials have been advocating for a reduction in this rate to make EVs more competitive in the market. The recent reduction to 5% on EVs is a notable step in the right direction, helping to reduce the overall cost and encouraging more people to opt for electric vehicles.
Significant Reduction in GST on Chargers and Chasing Affordability
A parallel development is the reduction in the GST rate on vehicle chargers from 18% to 5%. This change has made electric vehicle charging equipment more affordable, as chargers now fall in the same GST slab as EVs. This proactive move by the government has further reduced the operational costs for EV owners, making long-distance travel and constant charging more feasible.
Additional Incentives and Registration Benefits
In addition to the reduced GST rates, there are other incentives and benefits that make electric vehicles an attractive choice. For instance, the registration of EVs is free of charge, which can be a considerable saving for consumers. Furthermore, commercial users can avail of an interest incentive of up to 1.5 lakhs (Rs. 150,000) when purchasing EVs on loan. These incentives help to lower the initial cost and make EVs more accessible to businesses operating in the commercial sector.
Government Initiatives for Public Transport
In a broader push towards green transportation, the government has proposed several measures aimed at promoting the use of electric buses. According to the proposals, the hiring of electric buses with a carrying capacity of more than 12 passengers by local authorities would be exempted from GST. This initiative is in line with the government's commitment to adopting eco-friendly modes of public transportation, aiming to combat air pollution and reduce carbon emissions in urban areas.
Conclusion and Future Prospects
These changes in the GST structure, together with the various incentives and benefits offered, are expected to boost the growth of the electric vehicle market in India. The reduction in GST rates, combined with reduced operational costs due to cheaper chargers, and incentives for commercial users, all contribute to making electric vehicles a more viable and attractive option for consumers.
Looking ahead, the trends suggest that the government will continue to support the adoption of electric vehicles through policy and financial measures. As the market for EVs expands, the focus will be on fostering a supportive ecosystem for the manufacturing, distribution, and usage of electric vehicles, ultimately leading to a more sustainable and cleaner transportation sector.