GST On Electric Vehicles Reduced To 5 Per Cent

The GST Council has also reduced the taxes on electric vehicle chargers and charging stations 

The GST Council approves government’s proposal to slash GST rate on EVs. The revised GST rates will be effective from August 1 onwards. Expect EV manufacturers to reduce prices of their products starting August.

As a part of this year’s Union Budget, the government had proposed to reduce the GST on electric vehicles from 12 per cent to 5 per cent. The proposal has now been approved by the GST Council in its 36th Annual Meeting. Additionally, the council has also reduced GST rate on charger or charging stations for electric vehicles from 18 per cent to 5 per cent. These measures will be effective from August 1 onwards.

The GST rate cut will help reduce the ex-showroom prices of electric two-wheelers in India. This coupled with FAME II subsidy should help reduce the on-road prices of the electric two-wheelers considerably. To give you a perspective, the Ather 450 costs Rs 1,42,568 (ex-showroom Bengaluru), including 12 per cent GST. Its on-road price stands at Rs 1.22 lakh, which includes FAME II subsidy, charges for the registration (Rs 1011) as well as insurance charges (Rs 6068).

So if the GST rate is reduced to 5 per cent, then the ex-showroom price will go down to around Rs 1.32 lakh. If you include the FAME II subsidy, then the on-road price of the scooter would be much lower than its current pricing. 

Expect manufacturers to announce the revised prices of their electric two-wheelers next month. Commenting on the GST rate cut, Tarun Mehta, Co-founder & CEO at Ather Energy. “The Union 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 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. 

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. 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.”