GST Council Meet: GST Council Lowers Tax Rate On Electric Vehicles To 5% From 12%
The Goods and Services Tax Council on Saturday lowered tax on electric vehicles to 5 percent from 12 percent earlier. It also reduced the tax rate on the EV chargers or charging stations to 5 percent from 18 percent.
The new tax rate will be effective from Aug. 1, 2019, according to a Finance Ministry statement. The Council has also given an exemption to hiring of electric buses by local authorities from GST, it said.
The tax cut should make electric vehicles slightly more affordable, according to Krishan Arora, partner at Grant Thornton India LLP. It would also encourage more automobile makers to manufacture the next generation eco-friendly options, Arora told BloombergQuint.
Abhishek Jain, a partner at EY India said, this should help foster demand for the environment friendly variant through a tax arbitrage between conventional vehicles and EVs.
In her Budget speech, Sitharaman had said that the government wants to develop India as a manufacturing hub for electric vehicles and want to encourage their purchase. She had proposed a new section in the Income Tax Act, to allow a deduction of interest of up to Rs 1.5 lakh on a loan taken to buy an electric vehicle between April 1, 2019 and March 31, 2023.
Meanwhile, the Council extended the last date for availing the composition scheme for service providers to Sept. 30 from July 31, 2019. Service providers with annual turnover up to Rs 50 lakh can avail the composition scheme, which allows them to pay a flat GST of 6 percent without the option to avail input tax credit.
This is expected to help more small service providers to opt for the scheme and aid ease of compliance and better tax administration, Arora said.
The GST Council has also extended the last date for quarterly payment of taxes by composition dealers to Aug. 31 from July 31 currently.
The 36th GST Council meeting headed by Finance Minister Nirmala Sitharaman, which was to be held through video conference, had only one item on agenda of considering the Budget 2019 proposal to slash GST on EVs.
West Bengal Finance Minister Amit Mitra had on Tuesday written to Sitharaman objecting to a hurriedly-called "single agenda meeting" and said other important issues flagged by the states should be included in the discussions.
Mitra said that the Centre was taking a "myopic view" of the automobile industry by proposing a sharp cut in GST rate for EVs, and completely ignoring the "disastrous impact" of such a move on the existing automobile units and entire auto sector.
GST rate for petrol, diesel cars and hybrid vehicles are already in the highest bracket of 28 percent, plus cess.
(With inputs from PTI)