GST on Electric Vehicles in India

GST is not only applicable on EV, but also on other related products and services like EV batteries, other spare parts, and accessories. The GST rates on EV products and services are as follows:

1. GST on EV Charging Infrastructure: A GST of 5% is applicable on EV charging infrastructure like charging stations, EV charges, and other related equipment.

1. Repair and Maintenance of EV: A GST of 18% is applicable on the total cost incurred during repair and maintenance of EVs.

1. GST on EV Batteries: A GST of 5% is applicable for EV batteries. Earlier, a GST of 18% was applicable on EV batteries, but it was reduced to 5% in 2022.

1. Software Related to EV: A GST of 5% to 18% is applicable to software related to EVs.

1. EV Spare Parts and Accessories: At present, EV spare parts and accessories are taxed at 28% under the general category of unlisted goods. They were previously taxed at 12%, but now the GST rate has been increased.

Effect of GST on cost of Electric Vehicles

The reduction in GST rates on EV cars from 12% to 5% has a positive effect on consumers. The impact of GST reduction on EV cannot be viewed from a single angle. Read on to compare how much an EV car, petrol car, or diesel car, each priced at Rs.10 lakh would cost after applying GST.

From the example given above, when you buy an EV car, you save up to Rs.2.30 lakhs in GST itself. This price benefit has a positive impact on the market in the following ways:

1. Affordable Vehicles: With reduction in GST, EVs become significantly more affordable in comparison to diesel or petrol cars.

1. More Demand in the Market: The reduced tax rates make EV more affordable for the buyers, which in turn increases its demand in the market.

1. Promotes Adoption of EV Commercially: The reduced GST rates are also applicable on commercial EVs, which encourages use of electric taxis, delivery vehicles, and other fleet vehicles.

Subsidies and Incentives Offered by Government on EVs: 

The government has launched various schemes to promote the use of EVs across the country. Read on to know more about EV subsidies and incentives offered by the government:

1. PM E-Drive Scheme: To promote use of EV, the government had launched ‘Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME – II)’, which ended in the year 2024. After that scheme, the government launched the ‘PM E-Drive' scheme, applicable from October 2024 to March 2026, offering benefits similar to FAME-II. Through the PM E-Drive scheme, the government offers subsidies of Rs. 5,000 per kWh for FY 2024–25 and Rs.2,500 per kWh for FY 2025–26 for electric two-wheelers and three-wheelers.

1. Demand Incentive: Through this scheme, the Ministry of Heavy Industry (MHI) will issue e-vouchers to buyers to avail themselves of an upfront discount when buying an EV. The buyer should register on PM E-Drive Portal and complete the KYC process to avail themselves of this offer.

1. 80 EE Benefit: As per the old tax regime, you can claim a deduction of up to Rs.1.5 lakh in a year on interest paid on loans borrowed to purchase an electric vehicle.

1. PLI Scheme: Through the Production-Linked Incentive (PLI) scheme, the government promotes manufacturing of EV parts and components domestically to bring down the cost of EVs.

1. Subsidies at State-Level: Many states across the country are offering additional benefits to EV buyers, like road tax exemption, registration fee waiver, scrappage incentives, etc.

Effect of GST on Electric Vehicle Market

The government reduced GST on EV to make it more affordable for the buyer and promote its usage across the country. This move surely has a positive impact on the EV market in the following ways:

1. Boost in Sales: Reduced GST rates have made EV more affordable for the public. This has boosted the sale of EVs in recent years.

1. Manufacturing Domestically: Through the PLI scheme, the government is encouraging domestic manufacturing of EV spare parts and vehicles, which will further bring down the cost of EV.

1. Development of Infrastructure: India is steadily expanding both EV manufacturing capacity and charging infrastructure. This is further supported by reduced GST rates on EVs and EV charging equipment.

Pros and Cons of Electric Vehicle

Despite offering cleaner technology at an affordable price, EVs have their own advantages and limitations. Some of the pros and cons of EVs are as follows:

1. Costly Batteries: High battery cost is one of the major challenges faced by EV buyers.

1. Limited Charging Infrastructure: Though the government is promoting EVs, there are not enough charging stations. Charging EV becomes difficult, especially in remote and rural areas.

1. Environment Friendly: EVs emit zero carbon, which helps in tackling air pollution. This is one of the advantages of using EV.

1. Lower Running Cost: Using EVs is more economical per kilometer in comparison to traditional vehicles, as electricity is cheaper than petrol or diesel.