Auto firms seek GST relief for e-vehicles

By | September 30, 2016

Auto firms seek GST relief for e-vehicles

Manufacturers of electric vehicles have written to the government seeking exemption for their products from goods and services tax, as they fear the new tax system will nullify the benefits that they are now getting.

The industry is concerned that even if electric vehicles are brought into the lowest tax slab, prices would rise and come closer to those of petrol or diesel vehicles, affecting their demand in the market. The finance ministry has indicated that it doesn’t favour giving incentives under GST, which combines most indirect taxes into one and is expected to come into effect in April next year.

In a letter dated 26 September, industry body Society of Manufacturers of Electric Vehicles (SMEV) requested the finance ministry and the Empowered Committee of State Finance Ministers, which is working on the new tax system, to exempt electric vehicles under GST and incentivise consumers to purchase these products.

While getting tax incentives would help the segment, that wouldn’t hurt the government since the market is still small, SMEV Secretary Sohinder Gill wrote in the letter, while highlighting the environmental benefits that faster adoption of electric vehicles could bring. “We further submit that given the nascent stage of EV adoption and current low volumes, the financial impact of such an exemption would be significant,” he wrote. ET has seen a copy of the letter.

Excise duty on electric vehicles currently stands at around 6%. Most state governments have put lower VAT on electric vehicles, which ranges from nil to 5%. Industry stakeholders fear that even if electric vehicles are put in the lowest tax slab under GST, the total tax on the product will exceed the quantum of subsidy currently being doled out under the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India) initiative. “The lowest tax component under GST is expected to be much more than what we pay currently. Prices of our products will go up, if not exempt, and sales will drop as was seen after the withdrawal of withdrawal of incentive under the MNRE scheme,” Gill said.

Sales of electric vehicles in India are minuscule at the moment with lack of awareness, financing options and charging infrastructure deterring widespread use. In the first six months of the year, 10,000 electric two-wheelers have been sold in the country. The government has an ambitious target to put on road 6-7 million EVs by 2020 to clamp down on pollution. Any disincentives at this juncture may go against this objective, feels the industry. Source –[29-09-2016]

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