The move is to accelerate production of EVs and related components along with popularising the eco-friendly mobility among the general public
The 36th GST council meeting hosted in New Delhi today has seen the outcome of one of the most significant decisions made by the central government to curb pollution in the country. As reported during the time of the Union Budget 2019, the GST council has reduced the rate from 12 per cent to 5 per cent.
The meeting was attended by Finance Minister Nirmala Sitharaman through a video conference. It is to accelerate the industry in the transition from using conventional IC-engined vehicles to battery-powered two-, three- and four-wheelers. In addition, the GST council has also slapped down on the rate for electric vehicle chargers from 18 per cent to 5 per cent.
The new GST rates will come into effect from August 1, 2019 onwards. Approval on the exemption of hiring electrified buses by local authorities has also been granted. The reduced GST rates are believed to help in bringing electric vehicles to the hands of the mainstream volume-based customers.
The recent development should lead to significant savings for the buyers of EVs. For example, the Hyundai Kona electric SUV is likely to get a price cut of Rs 1,50,000 with the roll out of the updated regulations. On the other hand, the Tata Tigor EV, which has been made available in the commercial vehicle market, will see a price reduction of up to Rs 80,000, while the e-scooters from Ather should see a price cut of around Rs 7,000-8,000.
For electric mobility revolution to succeed in the near future, there are some key points to be addressed: One is the affordability, readily available charging infrastructure and range anxiety. It is apparent that cutting GST rates is not just enough to convince brands to invest heavily on the technology locally.
Nevertheless, it is considered to be the first major step in the right direction from the government. The government is expected to increase the registration charges of the petrol and diesel vehicles to prompt the sales of electric vehicles.
In the Union Budget 2019, the income tax deduction of Rs. 1.5 lakh on the interest paid on EV loans had also been implemented. The loan should be taken on or before March 31, 2023 and it accounts for a cumulative benefit of Rs. 2.5 lakh over the period of buying the electric vehicle for the taxpayers.
Moreover, under the second phase of FAME scheme introduced in April 2019, the government has planned to spend more than Rs. 10,000 crore for promoting EVs over the next three years by establishing charging infrastructure and providing incentives for the EV customers.
To boost make-in-India initiative, income tax exemption on setting up lithium-ion battery units, solar state batteries and solar charging infrastructure are also part of the project. It is worth noting that making all two-wheelers below 150 cc go electric by 2025 and all three-wheelers by 2023 has not been well-received among the manufacturers.