Close on the heels of Union Budget providing tax relief for buying electric vehicles, the GST Council in its 36th meeting on Saturday cut the tax on electric vehicles (EV) from 12 percent to 5 percent effective August 1, 2019.
The Council has also slashed rate for EV chargers from 18 percent to 5 percent making electric vehicle affordable for the buyers.
The twin rate cuts are set to further boost the EV sector. The Budget on July 5 had proposed Income Tax deduction of Rs 1.5 lakh on the interest paid on the loans taken to purchase electric vehicles.
“The proposed reduction in the GST rates on e-vehicles coming on the back of the recent customs duty reduction on EVs and parts signifies the governments resolve to go green and reduce the carbon footprint,” said M.S. Mani, Partner, Deloitte India.
The Council chaired by Union Finance Minister Nirmala Sitharaman has also exempted hiring of electric buses (of carrying capacity of more than 12 passengers) by local authorities from the Goods and Services Tax (GST).
This is a major push to the electric vehicles which has so far seen lukewarm response due to high ownership cost and insufficient infrastructure in the country. Not surprisingly, the share of electric vehicles out of total annual vehicle sales in the country is less than 1 per cent.
However, the Modi government is committed to transform the transport sector by promoting the use of green cars and bikes. The government’s think-tank Niti Aayog has put forward plan to shift to e-mobility for two-wheelers (below 150cc) and three-wheelers by 2025.