Union Budget 2019: SIAM Welcomes Government's Cut On Import Duty For Electric Vehicle Components

The Society For Indian Automobile Manufacturers (SIAM) has welcomed the central government's move to lower the import duty on CKD and SKD of electric vehicle components. The notification issued by the government earlier this week stated that the parts and components for electric vehicles imported in the country will be lowered by 10 to 15 per cent. Previously, the vehicle parts and components imported for assembly in India attracted an import duty of 15 to 30 per cent. The Central Board of Indirect Taxes and Customs (CBIC) has created a separate category for parts and components for electric vehicles. The CBIC has also removed customs duty exemption to battery packs for electric vehicles and also doubled the duty on battery packs for mobile phones. While the import duties were lowered on EV components, the government did not allow to import fully built electric vehicles at a concessional rate, a move that has also been appreciated by SIAM, as a way to promote the Make-in-India initiative.

The notification comes before the Union Budget 2019 and removes any ambiguity around the definitions of CKD and SKD for electric vehicles across segments. The notification states that fully built EVs will still attract 60 per cent/100 per cent duty for passenger vehicles, 50 per cent for two-wheelers and 25 per cent for trucks and buses, as they are for conventional vehicles, as suggested by SIAM. Furthermore, import duty on battery cell has been raised from zero to 5 per cent under the new notification. SIAM states that with no cell manufacturing in the country at present, the local battery pack with imported cells will become more expensive. Thereby making electric vehicles more expensive to own. That said, the move is expected to encourage cell manufacturing in the country and contribute to the electric vehicle infrastructure development.

SIAM also has its hopes pinned on the Budget 2019 and suggests that the import duty on battery cells with an expiry date be reduced back to zero, to enable local battery manufacturers to come with a solution. SIAM also stated that certain additional components need to be imported at concessional rates in a bid to kick-start assembly operations for electric vehicles. The move will help in creating supply and demand for EVs, at least until the industry achieves a minimum viable scale. The concessions can be revoked once the industry higher scale of operations.