The GST Council's rate rationalisation exercise could soon reshape India's electric vehicle (EV) market, with a proposal to raise taxes on premium four-wheelers while retaining relief for buses.
At present, all EVs enjoy a concessional GST rate of 5%, a policy aimed at boosting clean mobility. However, the Group of Ministers (GoM) on GST rate rationalisation has recommended sharp increases for high-end electric cars.
According to the proposals:
- Four-wheeled EVs priced between Rs 20 lakh and Rs 40 lakh will see GST jump from 5% to 18%.
- EVs costing above Rs 40 lakh will attract a steep 28% GST, up from the current 5%.
- Electric buses, however, will continue to benefit from the concessional 5% GST rate.
Officials explained that the current flat 5% structure disproportionately benefits affluent buyers of luxury EVs, while eroding government revenues. By differentiating between affordable EVs for mass adoption and premium EVs positioned as luxury products, the GoM aims to strike a balance between equity and fiscal prudence.
If approved, the change could substantially increase the price of high-end EVs in India, potentially cooling demand from wealthy consumers while maintaining affordability for mass-market electric mobility solutions.
The recommendations will be taken up at the GST Council meeting scheduled for September 3-4 in New Delhi, where the final decision will be made.
CAclubindia
