Union Budget 2019: Electric Two-wheelers To Become More Affordable

The government has proposed to reduce the GST rate for EVs from 12 per cent to 5 per cent

• The government aims to make India the global hub for manufacturing EVs.
• Custom duties on certain EV parts have also been proposed to be exempted.
• These measures, coupled with the Fame II scheme will reduce the price of electric two-wheelers.

The Ministry Of Finance has announced the Union Budget for this financial year today. The government has taken quite a few measures to boost the production, sale and ownership experience of Electric Vehicles (EVs). One of the major announcements is that the government has proposed the GST Council to lower the GST rate on electric vehicles from 12 per cent to 5 per cent. Also, in a bid to make India a global hub of manufacturing electric vehicles, the government has proposed to include solar storage batteries and charging infrastructure in the scheme as well.

The government is also considering to increase the custom duties for fossil-fuel-powered vehicles and vehicle parts to promote the Make In India initiative. However, it plans to exempt certain parts of electric vehicles from the same.

These measures, particularly the GST drop, should translate to a reasonable drop in the ex-showroom price of electric two-wheelers. The details of which EV parts will be exempted from custom duties are still unknown at the moment. However, we believe the proposed move will have a positive impact on the pricing of made-in-India electric two-wheelers too. That’s because even if the electric vehicles are designed and developed in India, there are certain components that are still imported.

Additionally, the Finance Minister Nirmala Sitharaman announced, “Government will provide additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles.”  However, this applies only to high-end electric vehicles like the upcoming Hyundai Kona electric.

Also, as part of FAME II scheme which has been enforced from April 2019, the government has earmarked Rs 10,000 crore to offer incentives to customers buying electric vehicles, including two-wheelers. The government has proposed setting up charging infrastructure across major parts of the country as well. These measures should help address range anxiety, thus encouraging the adoption of EVs. 

Electric manufacturers from across the country have welcomed the government’s efforts in the EV space. Tarun Mehta, CEO, Cofounder, Ather Energy said, “Government has already moved GST Council to lower GST on EVs from 12 percent to 5 percent and the additional income tax reduction is a major boost for end consumers to purchase EVs. It addresses the concern of the upfront cost of purchasing electric vehicles. This is the best example of a consumer driven change and is also how Ather envisions the EV sector to achieve scale and growth.  It now becomes imperative that OEMs chalk out plans that allows the industry to scale up and meet the demand for compelling products”.

Parveen Kharb, CEO and co-founder of 22Kymco commented, “The budget announced by the Finance Minister for 2019-20 will catalyse India’s journey to electrification and will be beneficial for both, the e-mobility industry as well as consumers who are looking to make the shift to electric vehicles. The budget has a strong synergy with the FAME – II scheme and the announcement will generate a positive sentiment. Lowering GST rates on electric vehicles to 5% will make EVs more attractive to the buyer in the future. In addition, incentives on income tax will also increase the momentum for the sector. We welcome the new budget and trust that this will encourage faster adoption of e-mobility in India.”