Tax Sops For Electric Vehicles Likely In Budget

Electric vehicle  buyers may get income tax relief.
An electrical plug connects an electric vehicle (EV) to a charging station. (Photographer: Fredrik Bjerknes/Bloomberg)
An electrical plug connects an electric vehicle (EV) to a charging station. (Photographer: Fredrik Bjerknes/Bloomberg)

The government may roll out incentives to promote electric vehicles by considering a lower Goods and Services Tax rate and providing a tax benefit to buyers in this week’s Budget for 2018-19, say sources.

There has been a lot of brainstorming so far, industry sources said. The government may lower the Goods and Services Tax on electric vehicles from the existing 12 percent to 5 percent, they said, adding that there could also be income tax benefits to enthuse buyers to make electric vehicles a viable and alluring option.

While income tax benefits can be provided to buyers through the budget, the GST Council’s nod would be required for lowering the tax rate.

The government aims to turn all public transport and 40 percent personal vehicle electric by 2030 cut reliance on imported oil and for a cleaner environment.

These announcements are likely as these would be a revenue-neutral exercise because the sale of electric vehicles is not even one percent of the total sales of vehicles – including commercial vehicles and two-wheelers -- in India, sources said.

More than 17.5 million two-wheelers and 3.04 million passenger vehicles were sold in India in the year ended March 2017.

Earlier this week, Power and New and Renewable Energy Minister RK Singh had made a case for tax incentives for electric mobility. “I think we also need to give some incentives to electric cars and vehicles,” he said.

The minister also indicated that the government might procure smaller cars under its e-mobility programme for its departments and ministries. “Currently, we have (procured) sedan type electric vehicles (cars). I think that we also need to start thinking of smaller cars.”

State-run Energy Efficiency Services Ltd. is procuring 10,000 electric cars for official use by the central government.

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