Nirmala Sitharaman reduces GST for EVs in 2019 Budget

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The Finance Minister, Nirmala Sitharaman, in her budget speech, announced that Goods and Services Tax (GST) for EVs would be reduced from 12 percent to 5 percent. She also announced an additional income tax deduction of Rs 1.5 lakh on the interest paid on loan for purchasing EVs. The Indian government had already approved Rs 10,000 crore for the Faster Adoption and Manufacture of Electric Vehicles (FAME) II scheme.

The decision to reduce the taxes on EVs comes from the Economic Survey 2018-19 where it mentioned that EVs represent the next generation in sustainable mobility and that India has the potential to emerge as a manufacturing hub for EVs, and in order to attract more customers towards it, the overall lifetime ownership costs needed to be reduced as well.

The companies which have advanced battery management systems would reap the benefit of the FAME II. Those planning to purchase electric two-wheelers below Rs 1.5 lakh will be subsidized to the tune of Rs 20,000 per vehicle, the three-wheelers under 5 lakh would get a subsidy of Rs 50,000, and for electric cars which are priced up to Rs 15 lakh. It is quite clear that the government is focusing more on electric vehicles as a way of boosting sales in the future.

The Niti Ayog has proposed all three-wheelers will be electric by 2023. The two-wheelers have to be electric from 2025, while all four-wheelers have to be electric from 2030.

This is a major boost for end consumers to purchase EVs. It addresses the concern of the upfront cost of purchasing electric vehicles and is the best example of a consumer-driven change. This is how Ather envisions the EV sector to achieve scale and growth. It now becomes imperative that OEMs chalk out plans that allow the industry to scale up and meet the demand for compelling products – Tarun Mehta, CEO, Co-founder, Ather Energy

The government’s focus on electric vehicles means that soon companies like Maruti Suzuki, Tata Motors, and Hyundai will plan electric cars soon. However, for the growth and boom of electric vehicles, infrastructure is needed. However, the government has not yet announced any subsidies in this regard. However, they may fall under the FAME subsidy.

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