Slashed tax rates of electric vehicles

• Goods and Services Tax (GST)
• ||
• August 19, 2019

The decisions are in line with the government’s latest budget announcements to promote electric vehicles (EVs) and to reduce carbon footprints. In this landmark, the GST council brought down the GST rate on EVs to 5 % from 12 %. The move has come as a shot in the arm for the auto industry which has been pushing for a tax boost to promote the sale of EVs. This aimed at accelerating the adoption of eco- friendly mobility solutions which will be effective from August 1, 2019. Additionally, the tax rate on chargers or charging stations for EVs has been slashed from 18 % to 5%. The council also approved GST exemption for hiring of electric buses with a carrying capacity of more than 12 passengers by local authorities from August 1, 2019. Certain decisions were taken regarding changes in GST law as mentioned below:

1. Option for payment of tax
   The last date for filing of intimation, in Form GST CMP-02, for availing the option of payment of tax (by exclusive supplier of services) has been extended from July 31 to September 30, 2019.

2. Filing date for furnishing statement
   The last date for furnishing statement containing the details of the self-assessed tax in Form GST CMP-08 for the June quarter (by taxpayers under composition scheme) has been extended to August 31, 2019. The earlier deadline was July 31, 2019.

3. Additional tax deduction
   In the Union Budget 2019-20, the government provided additional income tax deduction of INR 1.5 lakh on the interest paid on loans taken to purchase EVs. Besides, customs duty has been exempted on certain parts of EVs to further incentivize e-mobility in the country.

4. FAME II (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) scheme
   The Centre has also approved INR 10,000 crore to encourage faster adoption of EVs in the country under the FAME II scheme, which aims to encourage faster adoption of such vehicles by right incentives and charging infrastructure.

The central government has been taking initiative to popularize environment friendly electric vehicles. The government wanted to make India as a global hub of electric vehicle manufacturing. Also to make electric vehicle affordable to consumers, our government will provide additional income tax deduction of INR 1.5 lakh on the interest paid on loans taken to purchase electric vehicles. This amounts to a benefit of around INR 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle. The benefit is available for loans taken on or before March 31, 2023.

GST rate for petrol and diesel vehicles are in the highest tax bracket of 28%, besides cess. The council is the apex decision-making body of state finance ministers that is chaired by union finance minister. The move comes at a time when the government is already in the process of making EVs affordable. In another move which could significantly alter consumer behavior in favor of EVs, the government is likely to hike the registration charges on petrol / diesel vehicles.

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