The Indian government recently announced fresh measures to promote the sale of electric vehicles.
The Government of India notified that the Goods and Services Tax (GST) rate on electric cars, electric chargers as well as electric buses has been reduced. This reduction had long been seen as a fundamental relief that was essential to make electric vehicles and related equipment attractive to the mass market.
The GST Council, a committee of finance ministers of all states of India and headed by the finance minister of the country, agreed to reduce the GST rate on electric cars from 12% to 5% and on electric chargers from 18% to 5%. The hiring of electric buses by local authorities have been fully exempted from the GST.
The move to reduce the GST rate is critical to attracting mass-market consumers to buy electric vehicles, as that segment has so far been neglected by the government. The government has already announced several incentives for the use of electric vehicles in the public transportation sector. These incentives include direct subsidies on the purchase of cars for commercial use and buses. Some government agencies in the capital city of Delhi are already using around 500 electric sedans procured through a tender process.
The decision to reduce the GST rate on electric cars came just weeks after the government announced tax incentives for the non-commercial mass market. India’s finance minister Nirmala Sitharaman announced that consumers would be able to receive a tax exemption of Rs 1,50,000 (US$2,200) per year on auto loans taken to purchase electric cars.
The tax rate reduction on electric chargers is also a crucial decision which comes just days after the government issued an expression of interest document calling upon companies to set up 1,000 electric vehicle charging stations.
The new tax rates came into effect from 1 August 2019 and carmakers have started passing on the benefits to the customers. At present only a few electric cars are available for purchase by mass-market consumers, including Mahindra Electric’s e2o and Hyundai’s Electric Kona. Other electric cars, like Mahindra eVerito and Tata eTigor are still not available for purchase for non-commercial use.
Hyundai and Tata Motors have announced a reduction in prices of their electric cars by up to Rs 1,50,000 (US$2,176) and Rs 80,000 (US$1,160), respectively.