GST & Subsidies On Electric Vehicles in India

The government has provided direct incentives to increase demand. For a two-wheeler, for example, the 2019 Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) plan offers Rs 15,000 per kWh of battery capacity (up to 40% of the vehicle cost) (scooter or bike). It's a direct incentive of Rs 10,000 per kWh of battery capacity up to Rs 1.5 lakh for electric four-wheelers.

Furthermore, the Centre offers a low GST rate of 5% on all EVs, which is significantly lower than the tax burden imposed on gasoline and diesel cars, and first-time individual buyers who take out a loan can get tax benefits of up to Rs 1.5 lakh under Section 80EEB of the Income Tax Act. The Ministry of Road Transport and Highways stated in August 2021 exempting electric cars from paying costs for registration certificate issuance or renewal.

These EV subsidies/incentives are in addition to those offered by state governments and are available nationwide.

Impact of Incentives on Electric Car TCOs

In the instance of a 160-kilometre-per-day electric taxi in Delhi, the payback may be reached in just 1.9 years compared to a diesel car, even with subsidies. When comparing a fuel taxi to a CNG taxi, the payback time is 2.8 years for a petrol taxi and just 2.6 years for a CNG taxi. With current EV market pricing, cost parity is impossible without incentives.

Similarly, when government incentives are offered, a private automobile must be driven for at least 75 kilometres per day over ten years to attain cost parity with ICE cars. Even with the daily use of 150 kilometres, cost parity cannot be attained without government incentives. As a result, incentives are critical in getting electric automobiles to cost parity with their internal combustion engine equivalents.

Subsidies in different states of India

Delhi

Consumers can get a subsidy of Rs 5,000 per kWh of battery capacity up to Rs 30,000 for two-wheelers, as well as registration and road tax exemption. Consumers who wish to buy a four-wheeler can get a subsidy of Rs 10,000 per kWh of battery capacity up to Rs 1.5 lakh, plus registration and road tax deductions. However, these incentives are only available to the first 1,000 electric automobiles registered in the state.

Telangana

Telangana state cabinet passed an EV policy on the 5^th August, 2020. The following are the main characteristics of this governmental policy:

• For first 2 lacs,the 2-wheelers, five thousand4-wheelers, and the twenty thousand3-wheeler auto-rickshaws, there is a 100 percent exemption on road tax and registration expenses.
• The 1stfive hundredbattery charging and exchange stations will get a 25% capital subsidy on charging equipment.
• The public EV charging station has granted a ten-year duty exemption on electricity tariffs.
• Private electric car charging station providers and along with fast-charging battery equipment will be reimbursed up to 75%.

The state of Telangana has set aside 775 acres and 1,425 crores for the development along with establishment of electric vehicle manufacturing plants. EV sales are expected to climb by 23% by 2020, with around six thousand4-wheeler EV vehicles and six thousand two-wheeler EV cars conducting daily journeys and providing benefits to the environment.

Maharashtra

Road tax and registration fees are waived for all-electric vehicles in the state. The first 1 lakh electric two-wheeler customers in this state are eligible for a Rs 5,000 per kWh battery capacity incentive, with a ceiling of Rs 10,000. If the two-wheeler is purchased before December 31, 2021, the state will grant an early bird bonus of up to Rs 15,000 (with a 3 kWh battery). A scrappage incentive of Rs 7,000 is also available.

Gujarat

For the first 1.1 lakh electric two-wheelers, users can get a subsidy of Rs 10,000 per kWh of battery capacity up to Rs 20,000. Consumers can also get a road tax and registration exemption. Meanwhile, the first 10,000 auto purchasers would receive a rebate of Rs 10,000 per kWh of battery capacity up to Rs 1.5 lakh. This is in addition to registration and road tax exemptions.