Auto industry welcomes GST rate cut on electric vehicles

India's auto industry had reason to cheer in an otherwise gloomy market as the GST Council today recommended a reduction in GST rate on electric vehicles to 5 percent from 12 percent. The auto industry had urged the government to consider a rate cut on EVs to boost their adoption as despite the government's push, sale of electric vehicles wasn't taking off as anticipated.

The GST Council has also announced that the GST on EV chargers and charging stations has been reduced to 5 percent from the earlier 18 percent, which could improve the lagging EV infrastructure in the country.

The apex automotive body Society of Indian Automobile Manufacturers welcomed the move by the GST council, and said "over the years, this will help popularise electric vehicles and increase penetration in the country.” Meanwhile, apex electric vehicle body Society of Manufacturers of Electric Vehicle (SMEV) has urged the government to increase subsidy on EVs to Rs 20,000/kWh from Rs 10,000/kWh. It has also requested for the GST rate on the spares batteries to be brought down to 5 percent from 18 percent "to ensure that the EV users continue to enjoy the low running cost advantage.”

In a statement, Rajan Wadhera, President, SIAM, stressed on the need for a long term unambiguous EV roadmap. He further urged the government to take corrective steps to revive demand for automobiles that has dipped to multi year lows.

Today's decision by the GST Council follows the announcements made by the government to boost electric mobility in the Budget earlier this month. Finance Minister Nirmala Sitharaman had proposed a deduction from taxable income of up to Rs 1.5 lakh on interest payable on loans for purchase of EVs.

Apart from SIAM, many carmakers and senior auto industry executives lauded the GST council's decision. Here's what they had to say:

Hyundai Motor India

S S Kim, MD & CEO, Hyundai Motor India said,  "We welcome the GST council’s historic decision to reduce the GST on Electric Vehicles from 12 percent to 5 percent and on EV chargers from 18 percent to 5 percent. The tax benefit will help create an ecosystem that will encourage faster mass adoption of EVs in our society."

Audi India

Rahil Ansari, head, Audi India, said "The lowering of the GST rate on electric vehicles is definitely going to give a boost to EV’s in India and we are confident that that it will motivate customers looking for both entry-level EVs as well as luxury EVs that will enter the market. We are pleased that this coincides with our plans for introducing the Audi e-tron in India by the end of this year.

While these are great steps for the future, short-term measures supporting the overall industry, also the luxury segment, are required by the Government. All players are struggling with declining sales which in turn is leading to production cuts and may lead to job losses, too. The draft notification on hiking registration for internal combustion engine vehicles is detrimental to the overall development. We need support, not penalties.

Pawan Goenka, MD, Mahindra & Mahindra 

"Mahindra has many EV projects in progress. We will review immediately to see if we can fast forward some of them. We will also look at faster ramp-up of capacity."

Hero Electric India

Sohinder Gill, CEO, Hero Electric, said, "After the reduced subsidies and duty changes in FAME II, the price of affordable electric vehicles had gone up by around 20 percent. Reduction in GST is a very positive and a welcome move, as it will reduce the prices by 7 percent. This move also sends clear signals to the industry on government's 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. 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."  

Ather Energy

Tarun Mehta, co-founder & CEO, Ather Energy said,  “The budget gave a much-needed push to the EV industry and the outcome of the GST Council meeting is even more welcoming. The reduction of GST rates from 12% to 5% reduces the upfront cost of buying a vehicle by Rs 8000-10,000. 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 two-wheelers and and four-wheelers, consumers will have to begin paying 18 percent GST in the coming months.