In a bid to encourage the manufacture and adoption of electric vehicles (EVs) in India, the government instructed the Goods and Services Tax (GST) council to reduce GST on electric cars from 12 percent to 5 percent in the Union Budget.
The Goods and Services Tax Council, chaired by Finance Minister Nirmala Sitharaman, will meet today and decide on lowering tax rates for electric vehicles, officials said. Sitharaman presided over the earlier meeting of the Council on 21 June.
The 36th meeting of the Council, which will happen through video conferencing, is also likely to decide the valuation of goods and services in solar power generating systems and wind turbine projects for the purposes of levying GST, according to a PTI report.
The Council, which has state finance ministers as members, in its meeting last month, had referred the issue relating to GST concessions on electric vehicle, electric chargers and hiring of electric vehicles, to an officers committee.
The industry wants a tax cut of 7 percent. "That will be significant," said Surinder Gill, CEO, Hero Electric and Director General of the Society of Manufacturers of Electric Vehicles. The cut will then make e-vehicles affordable, and push for its adoption, he said.
The GST rate on raw material for EVs which includes the likes of lithium-ion batteries and electric motors though still stands at 18 percent. The affordability factor can be a hindrance for the purchase of e-vehicles, though, Gill said.
The solar industry has been pitching for a different ratio for splitting goods and services for levying GST.
The Council will also consider tax structure for solar power projects. That is the need of the hour, said sector specialists. E-vehicles can be truly carbon neutral if they work on solar power, said Kavan Mukhtiyar, Partner and Leader-Automotive, PwC India. The GST council should consider it favourably, Mukhtyar said.
GST rate for petrol and diesel cars and hybrid vehicles is already at the highest bracket of 28 percent plus cess. Yet, customers will still prefer to buy fuel-powered ones, said Gill. He said the government should consider bringing in indirect measures to boost early adoption of electric vehicles through the campaigns. "The awareness of e-vehicles is less in other parts of India as compared to the metros. The government should promote awareness as they did with a slew of projects like the Swachh Bharat Abhiyan, Pradhan Mantri Jan Dhan Yojana, among others. When there is a thrust from the government, it gets better attention from the public," said Gill.
To push domestic manufacturing of e-vehicles, the Centre proposed to the Council to slash GST rates to 5 percent from 12 percent. "We want the council to ratify the announcement made by the Finance Minister," said Mahesh Babu, CEO, Mahindra Electric.
The recommendations of the officers committee are likely to be placed before the Council today, officials said.
Updated Date: Jul 25, 2019 11:28:16 IST