GST Revision: Electric Vehicles Set To Become Cheaper Starting August 2019

Is air pollution bothering you? While resetting one's lifestyle is not easy, recent reports suggest that going eco-friendly was the new fad among people who cared for their environment. By hiking the parking fees temporarily, the Delhi government was able to help the situation a little better. Carpooling is being opted by a set of parents whose children go to the same school. Ola's shared rides at cost-effective rates would also help both, your pocket and the quality of air around you but while we are planning all this, eco-friendly cars have entered the scene. The likes of Mahindra, Honda, Volvo and Toyota have introduced electric and hybrid cars in India.

Effect of GST revision on e-vehicles

Automobiles contribute most to air pollution which is why eco-friendly vehicles with minimum emission and fuel efficiency are doing the rounds. Even for those who could afford it, the purchase wasn’t very pocket-friendly so far because the Goods and Services Tax (GST) on such cars are high. However, now there is some good news - electric vehicles will now be taxed at five per cent, down from 12 per cent. GST charges for these vehicles have also been reduced from the existing 18 per cent to five per cent. The new tax slab is effective from August 1, 2019. The move was finalised after the 36th meeting of the GST Council. Owing to this latest GST slashing, some vehicles like the Kona Electric can see a price cut of up to Rs 1.5 lakhs.

It was not hard to sense that a GST cut was on its way ever since finance minister Nirmala Sitharaman declared the following in her Union Budget speech: “The government has already moved the GST council to lower the GST rate on electric vehicles from 12 per cent to 5 per cent. Also, to make electric vehicles affordable to consumers, our government will provide an additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles. This amounts to a benefit of around Rs 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicles.”

Electric vehicles which are currently being taxed at 12 per cent was previously in the 20.50 per cent GST slab. Besides, electric buses when hired by local authorities will be GST exempt. Hybrid cars are attracting 43 per cent duty under GST which was previously 30.30 per cent.

Can India go electric?

The Indian government expressed its desire to see India go all electrical by 2030. Is that doable? Jose Roman, Corporate VP and Global Head of Nissan-owned Datsun says it is possible. He said while applying this on a pan-India level may be difficult, it is certainly doable in the major cities.

The government had also floated tenders for 10,000 electric vehicles and 4,000 charging stations in Delhi/NCR which was open for bidding in September. The tender, which was open for bidding in September 2017, was awarded to Tata Motors but Mahindra and Mahindra claimed that it would match Tata Motors' lowest bid of Rs 10.16 lakh per vehicle. The government is also looking at charging points for 500 electric sedans and this is the first phase of the tender.

No, there is no subsidy

When a government is keen to see more electric vehicles coming on to the roads, you may expect to get some grant from the authorities too. For instance, the authorities give solar panels at a certain subsidised price. However, electric car buyers would no longer be incentivised. Till date, the incentive extended was to the tune of Rs 1.30 lakh per electric car. It was under the clean energy FAME (faster adoption and manufacturing of hybrid and electric vehicles) and will now be removed.

So who is going to benefit? While the incentive to private owners has been withdrawn, the government has clarified that shared-mobility operators, that is, aggregators like Ola and Uber can avail of the benefit given that they run far more than privately owned vehicles. The good news is that while the initial budget under FAME was Rs 1,000 crore, the ministry has proposed that the second phase should grant Rs 9,000 crore. With this, aggregators may be prompted to increase their fleet because electric cars are cost-efficient.

A look at other countries 

Norway, Netherlands, China, United Kingdom have all said that they would only allow the sale of electric and hybrid vehicles in 2025-2030 timeframe. All petrol and diesel based vehicles would be banned in the United Kingdom by 2040. France has said it will ban the sale of gas and diesel cars by 2040, with the aim of being carbon neutral by 2050 while Barcelona, Copenhagen, and Vancouver all plan to ban gas- and diesel-powered cars by 2030. It looks like the next couple of decades would be crucial for the environment health of most cities.

Besides, electric cars are eligible for a host of non-cash incentives such as free parking, free charging, free or reduced highway toll charges, bus and carpool lane access, congestion charge exemptions, free number plates and even no restriction on driving.  In India, only 1,500 electric cars were sold last year as against 32 lakh CNG/ petrol/ diesel cars.

An IIT-Kanpur study said during winters, vehicles are the most consistent contributing source of pollutants PM10 and PM2.5. It's time to act!

Also read: What Stops India From Cycling Its Way Up?