The Federation of Indian Chambers of Commerce and Industry (FICCI) Electric Vehicle Committee Chair Sulajja Firodia Motwani on Tuesday called for a reduction in the goods and services tax (GST) rates on electric vehicle (EV) batteries and charging services to make electric mobility more affordable and competitive. Speaking on the sidelines of the FICCI National Conference on EVs, Motwani emphasised the need for urgent reforms to support the sector’s growth.
While the GST Council had previously reduced the tax on lithium-ion batteries from 18 per cent to 5 per cent in 2022, industry representatives are pushing for further rate cuts to bolster energy storage and e-mobility expansion. The current GST on EV charging services remains at 18 per cent.
GST reduction for EV affordability
Motwani highlighted the disparity in GST rates, noting that while EVs themselves are taxed at 5 per cent, replacement batteries attract an 18 per cent tax. She urged the government to align the GST on batteries and charging services with the 5 per cent rate applied to EVs.
“These changes will make EVs more competitive by lowering costs for consumers and incentivising greater adoption,” Motwani said, underscoring the importance of reducing the GST on critical components like charging infrastructure and batteries.
PM E-Drive scheme
Motwani also called for a review of the PM E-Drive scheme’s incentive amounts, suggesting that rising demand for EVs may necessitate an increased corpus to sustain growth. She proposed enhancing the scheme’s incentives to ensure more vehicles qualify for benefits over the next two years.
“PM E-Drive has great potential, and with demand increasing, it is essential that the incentive amounts be reviewed,” she said.
The PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-Drive) scheme, launched on October 1, 2024, is a central government initiative aimed at promoting electric mobility across India. With a financial outlay of Rs 10,900 crore over two years, the scheme seeks to accelerate EV adoption and establish essential charging infrastructure, contributing to a cleaner and more sustainable transportation system.
Priority sector lending for EVs
Motwani also advocated for including EVs under priority sector lending, which would provide consumers with affordable financing options. She argued that this move would make EVs more accessible, benefiting not only high-income individuals but also the general public.
GST Council meet
The upcoming 55th GST Council meeting is scheduled for December 21, 2024, in Jaisalmer, Rajasthan. Media reports suggest the council will address issues such as tax relief on health and life insurance premiums, potentially through exemptions or reduced GST rates. Discussions on rate rationalisation are also expected, including proposals to lower GST rates on essential goods like bottled drinking water and student notebooks from 12 per cent to 5 per cent.
While it is unlikely that the upcoming GST Council will provide relief for the EV sector, a recent Reuters report suggests that taxation policies on batteries and EV charging services may be revisited soon to support the sector’s growth.