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    GST on electric vehicles may be reduced to 5%

    Synopsis

    Lower duties are expected to encourage global manufacturers to invest in India’s shift to e-vehicles.

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    Lower duties are expected to encourage global manufacturers to invest in India’s planned shift to electric vehicles in order to try and bring down pollution levels.
    NEW DELHI: India may cut the goods and services tax (GST) on electric vehicles to 5% from 12% to provide a stimulus to the sector that’s a high priority for the Narendra Modi government.

    The GST Council is set to take up the proposal at its June 20 meeting, said a senior government official aware of the development. “There is a proposal to cut tax rates on EVs among other issues,” the official told ET.

    Lower duties are expected to encourage global manufacturers to invest in India’s planned shift to electric vehicles in order to try and bring down pollution levels. This comes as Punjab has written to the Centre seeking a review of tax rates.

    Tackling Slowdown
    The state has sought new rates for automobiles, textiles, micro, small and medium enterprises (MSMEs) and real estate to provide a boost to the economy, which has slowed to the lowest in five years in FY19.

    Punjab finance minister Manpreet Badal has suggested to union finance minister and GST Council chairman Nirmala Sitharaman that tax rates for these sectors need to be lowered to address the slowdown.

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    The automobile sector has sought urgent measures to boost demand, after recording the steepest decline in sales in 18 years. Passenger vehicle sales have been sliding and fell by 21% in May, prompting closure of dealerships and plant shutdowns.

    The RBI consumer confidence index, based on a survey in 13 cities, fell to 97.3 in May, indicating pessimism about jobs and prices.

    Electric Vehicles
    Policymakers favour incentivising electric vehicles in line with the government’s long-term strategy. The Niti Aayog has prepared a roadmap that envisages all vehicles sold after 2030 being electric. The roadmap lays down that all two-and three-wheelers should go electric from 2023 and all commercial vehicles from 2026.

    Experts said tax cuts would encourage manufacturing. “A reduction in the GST rate on EVs would incentivise global players to set up their manufacturing facilities in India and is also in line with the phased manufacturing programme of the government,” said Pratik Jain, national leader, indirect taxes, PwC. Under this, customs duties on EVs are proposed to be gradually increased. However, what needs to be seen is whether such a move would lead to an inverted duty structure, Jain added.

    Anti-Profiteering Framework
    The council is also expected to consider a proposal to extend the tenure of the National Anti-Profiteering Authority (NAA) by a year as there are a number of pending cases at various stages of disposal.

    The meeting is expected to take up several changes to the GST law to check tax evasion.
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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    24 Comments on this Story

    Anil Nahar459 days ago
    India is way behind in electric vehicles and charging station compare to China, India should do massive spending on charging station and subsidising the electric vehicles
    Anil Nahar459 days ago
    GST on electric vehicles should be minus 5%,
    Sourodipto Mukhopadhyay461 days ago
    Last night I was reading about a new motorcycle called Revolt RV 400 on zigwheels.com. It is an electric motorcycle with optional artificial exhaust pipes. The motorcycle is ''expected'' to cost around 1 lakh and ''claims'' a top speed of 156 kmph(I highly doubt it since my FZ-16 has given me a top speed of 135 in nearly 10 years.) But if the claims are true, then it will STILL have to compete with Royal Enfields, the ones that ACTUALLY shine on highways. Moreover the maximum distance it can go without recharging is NOT inter-city driving material. I''ll still keep an eye out for this one, although the ''2023 dream'' is not a dream. In case there are prospective motorcycle buyers around here, this is purely fantasy. Drenched in alcohol.
    The Economic Times