Budget 2019: Government Recommends Reduction Of GST From 12% To 5% On Electric Vehicles

The Union Budget for 2019 has been announced and Finance Minister Nirmala Sitharaman made a number of promises for the overall development of the country's economy. While there haven't been major incentives for conventional vehicles, the government has recommended changes to the Goods Services Tax (GST) council for electric vehicles (EVs). The government has suggested reducing the GST rate on EVs from the current 12 per cent to five per cent, in a bid to make the vehicles affordable. In addition, consumers will be provided with an additional income tax deduction of Rs. 1.5 lakh on the interest paid on the loans taken to purchase electric vehicles. The move is expected to expedite the growth EVs in the Indian auto sector.

The reduction in the GST rate is expected to make electric vehicles more affordable and subsequently more accessible to the average car buyer. The announcement will also bode well with electric auto sector that has been demanding reduction in GST rates. In another push for faster adoption of electric vehicles, the customs duty is also being exempted for certain components of electric vehicles. The move also bodes well with NITI Aayong recent reccommendation to ban two-wheelers under 150 cc 2025, and three-wheelers by 2023, and replace them with electric vehicles instead.

The push is expected to further gauge the manufacturer's interest in the EV space, especially with several mainstream automakers making the transition to electric mobility. Players like Mahindra, Hyundai and Audi have their all electric products lined up for launch this year, while Maruti Suzuki will be introducing its first electric vehicle in 2020. In the two-wheeler segment, Bajaj Auto is likely to enter the e-mobility segment with its Urbanite branded scooters, while homegrown players like Okinawa, Ather, Revolt will benefit from the new incentives. Italian manufacturer Piaggio will also be entering the electric three-wheeler segment this year with its new offering. The Finance Minister also announced advanced battery manufacturing will be incentivised, as part of the union budget speech.