Union Budget 2021-22: EV Makers Seek Lower GST, Import Duty Cut

Finance Minister Nirmala Sitharaman will present the Union Budget on February 1, 2021. And even as the economy looks at a path of revival after the COVID-19 pandemic hit industry hard, the 2021 Union Budget will be important, not just for industry as a whole, but for every individual, as India looks to rebuild its economy after the global pandemic. Like every industry, the electric vehicle industry in India is hoping with anticipation that the Union Budget 2021 will include some sops for the EV makers, to give a spark of growth to the industry.

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"The year 2021 can prove to be a revolutionary year for the electric vehicle (EV) industry. We have high hopes from the union budget this year and are optimistic that the government will continue to take the right steps to place India on the global EV map. With that said, we urge the finance minister to reconsider the current taxation framework applicable on raw material and the final product in case of EVs. While the GST input on raw material is 18%, the tax on outward supplies currently stands at 5%, leading to an implicit inverted duty structure for us (manufacturers). This move could help in optimizing the cash flows," said Jeetendra Sharma, Founder and Managing Director, Okinawa Autotech.

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Manufacturers like Ampere Electric are expecting reduction of GST and import duty for lithium cells

Industry leaders from the EV segment, as well as analysts expect more reforms and incentives for indigenous manufacturing to help accelerate electric vehicle consumption across the country. So far, the growth of the EV industry has not been as expected, and the industry is hoping that the government will lower GST on electric vehicles, as well as lower import duties on lithium ion cells, which form the fundamental core of lithium ion batteries that power electric vehicles.

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"Last year, the impact of the pandemic was tough on an already low performing automotive sector. Despite all the challenges, EV adoption continued to increase and the government's constant support in helping EV companies reduce cost of ownership by offering subsidies and other incentives, is highly commendable. We hope that in this budget, the government considers reducing the GST rate on lithium ion batteries. This would go a long way in providing a relief to EV manufacturers in the country and effectively increase the adoption of value-for-money EVs like Gemopai," said Amit Raj Singh, Co-Founder and Managing Director, Gemopai.

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Electric two-wheeler manufacturer Okinawa is looking to ramp up manufacturing and hopes the budget will provide much-needed impetus and sops to the EV industry

Electric two-wheelers are going through a rapid transformation, as more and more consumers are coming forward to adopt electric two-wheelers. While running costs of electric two-wheelers are significantly lower than internal combustion engines, powered by petrol, EV makers feel the high cost of owning an electric vehicle is still a challenge for many prospective customers. A reduction in GST and import duty on lithium ion cells is what EV makers are seeking from the government to give a boost to the electric vehicle sector.

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"Higher cost of owning an EV is still a major bottleneck in its adoption along with GST on raw material. Customs duty on EV-related product and technology is still a major challenge for the manufacturers. Measures that would augur well for the EV industry in the upcoming budget would be to tackle the high GST, cost of raw material and custom duty and to encourage the production of lithium powered batteries in India which constitutes almost 40 per cent cost of the vehicle. We also look forward to making retail finance available through nationalised and private banks by including the EV in priority sector lending," said Harsh Vardhan Didwania, Co-Founder and Director, Eeve India.

On the wishlist for EV manufacturers is also an extension of the Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (FAME) II scheme for two more years upto 2025 in the Union Budget 2021-22. The FAME-II scheme came into effect from April 1, 2019 with a budget of Rs. 10,000 crore, and for a period of three years. Electric vehicle manufacturers also want the government to look into providing financing solutions for customers to buy EVs.