The government should exempt electric vehicles from the ambit of Goods and Services Tax (GST) as the sector significantly contributes in reducing vehicular pollution, industry association SMEV today said. In a letter to Finance Minister Arun Jaitley, Society of Manufacturers of Electric Vehicles (SMEV) has requested that the government should “consider a special treatment for electric vehicles via an exemption from GST when the GST slabs are determined for the automobile sector”.
SMEV is an association representing Indian manufacturers of electric vehicles and electric vehicle components.
It said that the electric vehicles (EV) are being incentivised the world over for faster adoption as they have been recognized as a significant contributor to reduction of vehicular pollution.
“Widespread usage of this vehicle is expected to gain significantly in ensuring fuel security, attain saving to the tune of Rs 42,000 crores in crude oil subsidy,” it added.
About 80,000 customers have adopted electric two-wheelers, e-rickshaws and small electric cars last year. The industry is still in a nascent stage and it is just the beginning to find its feet in the Indian automobile industry, it said adding, “It is imperative that the favorable tax structure should continue under the GST regime.
“GST on electric vehicles should ideally be fully exempted or at best be kept at 5 per cent. Anything more than that will certainly increase the prices of EVs and the EV industry that has just started seeing some green shoots will again de-grow and may collapse altogether,” it said.
Given that the number of electric vehicles sold in the country is very small fraction of all automobiles sold, the impact of such an exemption would not be burdensome for the exchequer, it added.
A 4-tier GST tax structure of 5, 12, 18 and 28 per cent, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess, was decided by the all-powerful GST Council.