The nascent electric vehicle industry in the country is bracing for a whammy from this weekend’s upcoming GST Council Meeting. After years of incentives and push through accommodating policies, it is likely that the 55th Council meeting scheduled on Saturday in Jaisalmer, Rajasthan will increase tax on the resale of electric vehicles from the present 5 or 12% (depending on category) to 18%.
The Fitment Panel has already recommended raising the GST, possibly to raise it at par with petrol and diesel cars (over a certain cc) and SUVs that are already taxed at 18%.
“I think the government wants to let everything happen according to market dynamics,” said Ayush Logia, CEO of the EV startup Lohia.
This would make used electric vehicles less appealing in the second-hand auto market and could discourage many from opting for buying electric cars or two-wheelers.
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The industry is now praying that no other hikes are on the anvil, especially on the 5% GST that new electric vehicles attract. Corresponding combustion engine vehicles are charged much higher — for example, small and medium cars as well as bikes are charged at a 28% tax rate, while a bike above 350 cc is slapped with a 3% compensatory cess. Similarly, once a car’s length and/or cc goes up, compensatory cess also gets added, which can go up to 22% for SUVs.
For hybrid cars, while the GST base rate of 28% remains, various other ceases and taxes make the effective tax rate as high as 48%. This is something the Japanese car manufacturers in the country who have pitched their wagon to hybrids rather than EVs for the future course would dearly love to change — if not, decrease the hybrid tax rate, at least increase the EV tax rate for what they term ‘level playing field.’
But other automakers are aghast. “Indian taxes are the highest in the world. India is relatively cheaper (market generally for most goods), but why are cars charged more?,” remarked Hardeep Singh Brar, senior vice president of Kia India. “GST up to 48% while registration cost comes to another 10-15%! If you want this industry to grow, you have to stop treating it as a luxury category. Not just for the auto industry to grow, but also for economic growth and employment to rise.”
The government had doled out two rounds of FAME (Faster Adoption of Manufacturing of (Hybrid) and Electric Vehicles starting in 2015, whereby incentives were provided to manufacturers to make the cost of electric vehicles attractive to customers. However, a lot of irregularities were found last year, following which, the government came up with a much more stringent PM E-DRIVE scheme which cut short many of the bigger incentives in the earlier FAME schemes.
