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News18 » Auto
4-min read

GST Council Reduces Tax on Electric Cars and EV Chargers to 5 Per Cent

In a bid to promote electric mobility, the GST Council has reduced the taxes on Electric Cars and EV chargers to 5 per cent.


Updated:July 27, 2019, 7:37 PM IST
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GST Council Reduces Tax on Electric Cars and EV Chargers to 5 Per Cent
Photo for representation only. (Image: AFP Relaxnews)

In a bid to push electric mobility, the GST Council on Saturday has decided to reduce tax rates on electric vehicles from 12 per cent to 5 per cent and when it comes to the EV chargers that are required to charge these electric vehicles, the tax rate has been reduced from 18 per cent to now 5 per cent.


The new rates will be effective from 1st August 2019. The council further approved an exemption from GST on the hiring of electric buses by local authorities.

The Council, which is chaired by Union Finance Minister and has state finance ministers as members, in its meeting last month, had referred the issue relating to Goods and Services Tax (GST) concessions on electric vehicles, electric chargers and hiring of electric vehicles, to an officers committee.

GST rate for petrol, diesel cars and hybrid vehicles, on the other hand, are in the highest bracket of 28 per cent plus cess.

Here's how the Indian auto industry is responding to the decision:

Sohinder Gill, Director General, Society of Manufacturers of Electric Vehicles (SMEV) said, "The Government is lately showing very clear intentions of promoting EVs and GST reduction is one such measure in line with the series of actions taken by the government in the last few months. We welcome the 7% reduction in GST as it will reduce the gap between the EVs and the IC Engine vehicles. If FAME 2 was a dampener, the GST reduction is certainly a bright spot in the National EV policy. The EV industry now awaits the corresponding reduction of the 18% GST in the spare batteries as it will help maintain the low running cost of EVs over their lifetime."

Rahil Ansari, Head, Audi India said, "The lowering of the GST rate on electric vehicles (EV) from 12% to 5% is definitely going to give a boost to EV’s in India and we are confident that it will motivate customers looking for both entry-level EVs as well as luxury EVs that will enter the market. The government has also placed special emphasis on the development of necessary charging infrastructure during the union budget announced recently which shows its seriousness towards the growth of electric vehicles in India."

"While these are great steps for the future, short-term measures supporting the overall industry, also the luxury segment, are required by the Government. All players are struggling with declining sales which in turn is leading to production cuts and may lead to job losses, too. The draft notification on hiking registration for ICE vehicles is detrimental to the overall development. It’s high time that short term actions are being taken by the Government to help the industry overcome this phase and contribute in the long run. We need support, not penalties." he added.

Tarun Mehta, CEO and Founder, Ather Energy said, "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 Rs 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 to 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 a 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."

Pankaj Tiwari, India Business Head - Avan Motors said, "Ensuring continuity in Govt's commitment to accelerate the growth of sustainable mobility ecosystem in the country, GST Council's decision will bring an end to the wait-and-watch stance that the industry was taking so far for the reason of lack of clarity on the future policy initiatives towards EVs and the related support system. What started with FAME II, followed by the budgetary benefit by the Finance Minister extending tax benefit of Rs 1.5 lakh on the interest paid on the loans taken for the purchase of the electric vehicles, the GST Council's decision to reduce the rate on electric vehicles and chargers to 5 per cent has clearly established the Government's intention of a long term view towards the segment. Reciprocating to these announcements, we assure of our commitment aligned with such initiatives by bringing state of the art products and technologies to the market."

Jeetender Sharma, Founder & MD, Okinawa Autotech Pvt Ltd. said, "We welcome the GST Council’s decision to slash the GST on electric vehicles to 5 per cent from 12 per cent and reduced tax rate on EV chargers from 18 per cent to 5 per cent. The 7 per cent tax reduction on EVs along with the tax rebates proposes in Union Budget will definitely encourage the shift towards electric mobility. These positive steps by Government have created a positive ecosystem for faster adoption of electric vehicles in India."

(With inputs from PTI)

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