GST on electric vehicles, chargers slashed

Our Bureau NEW DELHI | Updated on July 27, 2019

Tax rates for EVs reduced to 5 per cent from 12 per cent

The Goods & Service Tax (GST) Council on Saturday decided to lower the duty on all electric vehicles (EVs) and the charger for such vehicles. This is the second booster for such vehicles in last four weeks.

According to a statement by the Finance Ministry, the GST rate on EVs will be reduced to 5 per cent from 12 per cent. As of now, petrol and diesel based automobiles attract GST at the rate of 28 per cent, besides a cess. However, due to the high cost of EVs, a lower duty, can, at the best, reduce the price gap between two kinds of vehicles, but the prices of EVs will still be higher.

In a bid to to make EVs affordable to consumers, the Union Budget 2019-20 provides for an income tax benefit for a EV buyer. Finance Minister Nirmala Sitharaman, in her maiden Budget on July 5, had said that the government will provide an additional income-tax deduction of ₹1.5 lakh on the interest paid on loans taken for purchase of EVs. This amounts to a benefit of around 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle.

In order to make infrastructure for EV affordable, the Council also decided to lower the GST rate on the charger or charging stations for EV to 5 per cent from 18 per cent.

Also, to make EV popular for public transportation, hiring of electric buses (of carrying capacity of more than 12 passengers) by local authorities will be exempted from GST.

All reduction will come into effect from August 1.

Boost to manufactures

Reduction in GST on EV and related accessories will help four-wheeler companies such as Hyundai, Mahindra, Tata and BMW (all of them have e-vehicle models) and Maruti-Suzuki (it will launch its e-vehicle next year). Besides, two-wheeler companies in the EV sector like Hero Electric, Revolt Intellicorp, Ather Energy, Kinetic Green, Tork Motors, 22Kymco and Log 9 Materials, will also benefit from the government’s move.

Also read: Lower GST is bright spot after damp FAME 2, say Electric Vehicle manufacturers

Commenting on the move, Abhishek Jain, Tax Partner at EY India, said that the reduced rate of GST on EVs should help foster demand for these automobiles; through a tax aribtrage between conventional vehicles and EVs.  “Separately, for a holistic outlook to this leitmotif, reduction in rate for infrastructure of these cars, should provide further inducement to this sector," he said.

In India, nearly 30 lakh four wheelers are sold in India every year, and EVs contribute anything between 10-15,000. Globally, the share of EVs in total sale is approximately 1 per cent, but in Norway, the share in the double digits.

Last date extended

The council also decided to extend the last date for enrolling under new composition scheme for service provider.

"Last date for filing of intimation, in FORM GST CMP-02, for availing the option of payment of tax under notification No. 2/2019-Central Tax (Rate) dated 07.03.2019 (by exclusive supplier of services), to be extended from 31.07.2019 to 30.09.2019,” the statement said.

Under the new scheme, service provider (apart from restaurants) can enroll for new composition scheme, provided their annual turnover is up to  ₹ 50 lakhs. Such provider will be required to pay GST at the rate of 6 per cent, but will not get any input tax credit (ITC). Also, he cannot charge and collect tax from the customer or even issue tax invoice.

Published on July 27, 2019

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