Electric Vehicles To Be Further Incentivised As Govt Proposes GST Reduction, Tax Benefits

Upto Rs 2.5 lakh in tax benefits could be available to EV buyers

As the Indian government prepares to tackle some of the many challenges that come with the electrification of vehicles, it has instructed the GST council to reduce the Goods and Service Tax (GST) on electric cars.

As the Indian government prepares to tackle some of the many challenges that come with the electrification of vehicles, it has instructed the GST council to reduce the Goods and Service Tax (GST) on electric cars. As a result, the tax on EVs would drop from 12 per cent to just 5 per cent. There will be tax concessions too, enabling those taking out loans to buy electric cars to save upto Rs 1.5 lakh on interest paid towards the loan every year. The total savings on the cards for EV buyers can go upto Rs 2.5 lakh. Another electrification challenge is cost of manufacturing, for which the policy makers intend to turn India into a global hub for EV production. That includes promoting the setting up of mega factories for lithium-ion batteries. Meanwhile, the setup of charging infrastructures and storage of solar energy will be prioritised via public-private partnerships. As of now, most components of an EV are imported and there are plans to offer exemptions from custom duty charges on a select range of parts. The Indian government had already announced a three-year budget of Rs 10,000 crore in the second phase plans for FAME (Faster Adoption & Manufacturing of (hybrids and) Electric Vehicles. From the context of the Indian market conditions where there is a lack of affordable, long-range EVs and supporting infrastructure, localised manufacturing of EV components is only half the battle won. In the results of its latest economic survey, the government also acknowledged the need for reducing overall lifetime ownership costs of electric vehicles to increase their mass-market appeal. Meanwhile, the Indian EV space will be graced with a slew of products from various manufacturers, starting in 2019 itself. First up will be the Hyundai Kona Electric, which is about to launch next week on 9 July. It will be followed by the MG eZS compact SUV and the Audi e-tron luxury SUV, both of which are slated to be introduced later this year. More mass-market EV models such as the Maruti Suzuki Wagon-R based EV, Tata Altroz EV and Mahindra XUV300 EV are expected next year. All of these will be electrified versions of models that will also be sold with regular internal combustion engines. Challenges and difficulties aside, the Indian EV market seems ready to roll.