GST Council slashes tax rate on electric vehicles from 12% to 5%

GST Council slashes tax rate on electric vehicles from 12% to 5%
GST Council slashes tax rate on electric vehicles from 12% to 5%

The Goods and Services Tax (GST) Council on Saturday slashed the tax rate on electric vehicles (EVs) to 5% from 12% and the levy on EV chargers or charging stations to 5% from 18%, effective from August 1, 2019, an official statement said.

The council has also extended a GST exemption on hiring of electric buses by local authorities with a carrying capacity of more than 12 passengers, it said.

The decisions are in lines with the government’s budget announcements to promote EVs and to reduce carbon footprints, one finance ministry official said requesting anonymity.

While stating that the phase-II of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles [FAME] scheme with an outlay of 10,000 crore was already commenced from April 1, 2019, finance minister Nirmala Sitharaman in her budget speech on July 5 said, “The main objective of the Scheme is to encourage faster adoption of electric vehicles by way of offering upfront incentive on purchase of electric vehicles and also by establishing the necessary charging infrastructure for electric vehicles”. FAME-I was launched from April 1, 2015 with an outlay of Rs 895 crore.

In her budget speech, Sitharaman said that the government wanted to make India as a global hub of electric vehicle manufacturing. “Also to make electric vehicle affordable to consumers, our government will provide additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles. This amounts to a benefit of around Rs 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle,” she had said. The benefit is available for loans taken on or before March 31, 2023.

Although the council decisions are often unanimous, some members had earlier expressed apprehensions that the move would adversely impact the existing automobile industry. GST rate for petrol and diesel vehicles are in the highest tax bracket of 28%, besides cess. The council is the apex decision-making body of state finance ministers that is chaired by union finance minister.