Will GST cut propel EV sales

While reduction in GST rates on electric vehicles (EV) from 12 per cent to 5 per cent will give boost to EV adoption in India, creating reliable charging infrastructure will be the key for the success of e-mobility in the country, says this APF report.

During the GST Council’s 36th Annual Meeting, GST on electric vehicles has been brought down to 5 per cent from 12 per cent effective from August 1, 2019. The council has also reduced GST rate on charger or charging stations for electric vehicles from 18 per cent to 5 per cent. Welcoming the decision, S S Kim, MD & CEO, Hyundai Motor India Ltd, said, “The tax benefit will help create an ecosystem that will encourage faster mass adoption of EVs in our society. With the launch of India’s first fully electric SUV - KONA Electric, Hyundai has already strengthened its commitment to bring ‘Clean Mobility’ solutions to the Indian customers and we are thankful to government of India for fulfilling their promise as this strategic decision by GST council will further strengthen confidence of prospective buyers for electric mobility in future.”

As a result of this tax cut, automakers are expected to reduce the price of their EVs. Shailesh Chandra, President – Electric Mobility Business and Corporate Strategy, Tata Motors Ltd, announced, “In light of the recent announcement made by the government to slash the GST rates of all electric-powered vehicles from 12 per cent to 5 per cent, the price of Tata Motors’ EVs will be reduced by up to Rs 80,000 starting August 2019. The price reduction will be valid across all the variants of Tigor EV - XE (Base), XM (Premium) and XT (High).”

The move is aimed at accelerating the adoption of eco-mobility in the country. “The reduction in GST is on expected lines and a logical extension of government’s electric push. This along with other EV friendly measures will push the industry onto fast lane and promote greater adoption by end user as means to affordable last mile mobility. We look forward to India’s rise as an EV manufacturing hub and we will continue to play an important role in this transformation,” opined Nagesh Basavanhalli, MD & CEO, Greaves Cotton.

Ajay Durrani, Managing Director, Covestro India, added, “The positive nod at the 36th GST Council meeting to reduce the GST rates on EV from 12 percent to 5 percent is a significant move from the Government to boost the EV adoption in India in a big way. The GST reduction on EV is directly proportional to the reduction in internal combustion engine vehicles which as a result fosters feasible growth of electric vehicles in India. Furthermore, the industry positively looks forward for a reduction of rates on batteries in order to create a robust environment for the growth of EV in India.”

Budget talks

With India aiming to increase number of electric vehicles (EVs) on the road, budget 2019-20 had outlined various proposals (including reduction of GST rate to 5 per cent) to give a boost for manufacturing of EVs and developing India as a global hub for the same. “It (GST rate reduction) addresses the concern of the upfront cost of purchasing electric vehicles. This is the best example of a consumer driven change and is also how Ather envisions the EV sector to achieve scale and growth. It now becomes imperative that OEMs chalk out plans that allows the industry to scale up and meet the demand for compelling products,” said Tarun Mehta, CEO, Cofounder, Ather Energy.

To make electric vehicles affordable to consumers, Budget 2019-20 announced additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles. “Reduction in GST on EVs as well as tax rebate on interest for purchasing EVs should give the requisite demand push to the electric vehicle sector. However, specific financial option for purchase of EVs by aggregators and E-logistics players still not addressed in the budget,” said Vineet Mehra, Managing Director, DOT - one of the first companies in India to offer green mobility services through its fleet of 100-per cent, two and three wheeler electric vehicles.

According to Maxson Lewis, Managing Director, Magenta Power, the budget is a positive push for adoption of electric vehicles in India and is in line with the series of steps taken and announcements in that direction - namely on 4 counts (3 direct and one indirect aspect) are important from that perspective. “While the total cost of ownership was always in favour of EV, the announcement in the reduction of GST rate on electric vehicles from 12 per cent to 5 percent reduces the upfront higher cost as against an ICE engine and improves the buying decision in favour of EVs. The additional income tax deduction of Rs 1.5 lakh on interest on loans taken to purchase electric vehicles is a bonus and the industry had not anticipated that. Credits to the government for this innovative idea to push for EV,” he added.

A day ahead of the budget 2019, the government lowered customs duty on import of parts and components. “This will drive domestic assembling of electric vehicles, which today is plagued by Chinese imports and is actually hurting the EV industry. The EV industry primarily belongs to start ups and will not be the domain of large monoliths. The push to simply and support the Start Up ecosystem will in effect push the EV growth a lot faster,” said Lewis.

Still a long way to go

Though the industry has welcomed the budget 2019-20 incentives for electric vehicles, some experts feel that the government should facilitate all types of green mobilities. “We appreciate government’s initiative to promote clean & green environment with special benefits to encourage electric vehicles (EV). EVs do bring the benefits towards fossil fuel conservation & lowering of carbon emissions. There are other forms of green mobility which will help the government achieve the same objective. The government should also align its taxation policies towards such green mobilities which promote reduction of fossil fuel & betterment of environment. Thus, the focus of taxation should not only be restricted to promote and facilitate the shift to all types of green mobilities but should also be towards all other means which contribute effectively to increased fuel economy and reduced tailpipe emissions,” elaborated Shekar Viswanathan, Vice Chairman & Whole-time Director, Toyota Kirloskar Motor.

While the tax incentives and the exemption of customs duty on certain parts of EV will make the ecosystem more conducive, creating pan-India EV charging infrastructure will be the key for wider acceptance of electric vehicles in the country. The budget does take note of the lack of charging infrastructure for EVs and the need to invest in battery technology so that post sales and maintenance costs of EVs are efficiently controlled. “Building the infrastructure for EV should be a primary focus area and the emphasis should also be on manufacturing and production of batteries. FAME II scheme aims to provide these necessary changes and encourage faster adoption of electric vehicles. While the GST reduction will enable growth in the sector, it is also important to address the increasing costs of EV components,” commented Munira Loliwala, Business Head – EMPI, TeamLease Services.

According to her, the budget should have also looked at infusion of funds and labour at periodic intervals to ensure smooth manufacturing and development of EV technology in India.

This strategic decision by GST council will further strengthen confidence of prospective buyers for electric mobility in future. The tax benefit will help create an ecosystem that will encourage faster mass adoption of EVs in our society. S S Kim, MD & CEO, Hyundai Motor India Ltd

This (reduction in GST) along with other EV friendly measures will push the industry onto fast lane and promote greater adoption by end user as means to affordable last mile mobility. Nagesh Basavanhalli, MD & CEO, Greaves Cotton

The government should also align its taxation policies towards other forms of green mobility which promote reduction of fossil fuel & betterment of environment. Shekar Viswanathan, VC, Toyota Kirloskar Motor

While the GST reduction will enable growth in the sector, it is also important to address the increasing costs of EV components. Munira Loliwala, Business Head – EMPI, TeamLease Services