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In a relief for Electric Vehicle manufacturers, the GST Council has decided to reduce GST on electric vehicles to 5 percent from the existing 12 percent. The new rates will be effective from 1 August 2019. The Council also reduced GST on EV chargers from 18 percent to 5 percent.
The announcement comes as a relief to charger manufacturers. Atul Arya, Head, Energy System Division, Panasonic, said, "It is definitely a boost for industry. Charger had a higher cost, even some states are trying to subsidize it. It will further reduce the net cost of charger," said
The Council has also approved exemption from GST on hiring of Electric Buses by local authorities.
Reactions from the Electric Vehicle industry has been positive and manufacturers have welcomed the decision of reduction in GST.
Tarun Mehta, CEO, Co-founder, Ather Energy, said, "The reduction of GST rates from 12% to 5% reduces the upfront cost of buying a vehicle by INR 8000-10,000. Compounded by the tax rebates offered in the Union Budget, today electric vehicles are an affordable upgrade from existing ICE options."
"Along with the vehicles and chargers, a GST reduction on using public charging network should have also been considered. Though today we offer free charging for all electric 2Ws and 4Ws, consumers will have to begin paying 18% GST in the coming months. Offering preferential electricity rates along with a lowered GST rate will make owning EVs more affordable and will increase adoption," he added.
Mr Mehta also said, "As a manufacturer, we would like the Centre to review the current taxation framework applicable on raw material and the final product. There is an inherent inverted duty structure as the GST input on raw material and other overheads are on average of 18 % wherein the output is now going to be pegged at 5%. This structure results in significant working capital blockage."
When asked about the existing GST refund framework, Mr Mehta said, "Even with the existing GST inverted duty refund framework in place, there is working capital blockage on the overheads and capital investments. A comprehensive GST refund structure of electric vehicle manufacturers or a reduced GST liability on the raw material should be assessed for seamless cash flows in the long run."
Mahesh Babu, CEO, Mahindra Electric, 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."
Mr Paritosh Dey, Co-Founder & CEO, Benling India Energy and TechnologyPvt Ltd., said, "We welcome the GST Councils decision to reduce GST rates for electric vehicles and EV chargers. This will provide a much-needed boost to the EV sector in India. The move goes parallel to the Government's vision to roll out an all-electric fleet by 2030 and to make the non-fossil fuel vehicles beneficial to buyers. The announcements will catalyse India's journey to electrification and will be beneficial for both, the e-mobility industry as well as consumers looking to make the shift to electric vehicles."
Mr. Sohinder Gill, CEO at Hero Electric India, said, "After the reduced subsidies and duty changes in FAME 2, the price of affordable segment Electric vehicles had gone up by around 20%. Reduction in GST is a very positive and a welcome move, as it will reduce the prices by 7%."
"This move also sends clear signals to the Industry on governments seriousness in promoting EVs. However even after the GST reduction, the prices of the affordable segment EVs will still be much higher than IC engine vehicles and will remain the biggest stumbling block for purchase," he added.
Mr Gill also said, "The Industry and the Government must work together to create price parity at-least for 2 to 3 years so as to trigger mass adoption. Some of the steps requested by SMEV are- Subsidy on all the EVs should be INR 20000/Kwhr of battery as it is for the buses; financing by Public sector banks; mandating businesses that use polluting vehicles for their operations to switch to electric and a major awareness campaign on the benefits of EVs by the Govt under "Swachh Bharat" initiative. The GST on the spares batteries is still 18% and that should also be brought down to 5% to ensure that the EV users continue to enjoy the low running cost advantage."
Mr Jeetender Sharma, Founder and Managing Director, Okinawa Autotech Pvt Ltd., said, "We welcome the GST Council's decision to slash the GST on electric vehicles to 5 percent from 12 percent and reduced tax rate on EV chargers from 18 percent to 5 percent. The 7 percent tax reduction on EVs along with the tax rebates proposes in Union Budget will definitely encourage the shift towards electric mobility. These positive steps by Government has created a positive ecosystem for faster adoption of electric vehicles in India."
Nishchal Chaudhary, Founder and CEO of BattRE, said, "Absolutely delighted that the reduction of GST (12% to 5% on EV and 18% to 5% on chargers) has been approved. The tax arbitrage
between ICE vehicles and EVs will help in building increased demand by consumers for electric scooters. E-mobility is going to grow significantly with these kind of positive measures by the
Thoughts About The Reduction Of GST On EVs From 12 Percent To 5 Percent
This is a good move by the government. Any move that reduces prices of electric vehicles will always help push for more sales. We hope that more people start turning to electric vehicles, especially with all the benefits being offered right now. The Electric Vehicle industry has welcomed the reduction in GST, and rightly so. Thankfully that government is doing one thing right.