30 Jul 19

Tax cuts for EV in India

India is serious about increasing the EV penetration, which is still anecdotical at this point in time, with less than 15.000 units registered per year. It’s a first big step to reach the Government’s objective of 30% EVs by 2030. The country is not only lacking EV enthusiasts, but also a supply of electric vehicles and sufficient charging infrastructure. Lots of work to do, but here’s a good start.


The main initiative was announced during the Government’s budget announcement: a special GST rate for EVs of 5%, down from 12% previously. The measure is meant to motivate consumers, obviously, but equally to boost EV production in the country. It seems like India has been looking across the boarder and likes China’s approach to produce locally to be sold locally.

Normal (diesel and petrol) vehicles will be sold at a GST rate of 28%. The delta seems high, but EVs will still be more expensive than ICE vehicles in India. Just a bit less from now onwards.

Income tax

In addition to the lowered GST rate, EV buyers will benefit from an additional income tax deduction of 1.5 lakh (USD 2,180) on the interest paid on a loan to fund an EV. Again, an incentive to reduce the delta between EV purchases and those of regular cars.

Side measures

As EVs need chargers, the Indian Government has also lowered the GST rate for charging equipment from 18% to 5%. This benefits not only the EV buyers, but also real estate owners, willing to invest in chargers.

Finally, in order to enhance popularity of EVs with public transit providers, hiring electric buses or vans with a capacity of more than 12 people, will be completely exempt of GST.

Expected outcome

Naturally, the favourable GST regulations and additional income tax deductions will make EVs slightly more attractive for the (wealthy) consumer. Consequently, the EV producing OEMs will benefit from a higher demand; currently, Hyundai, Tata, Mahindra and BMW are offering an EV on the Indian market and many more offer 2 or 3-wheelers.

Nevertheless, in a country where most car buyers spend between USD 5,000 and 10,000 on a car, it seems that India needs to address the unavailability of cheap EVs in parallel. Again, this is a process that China has controlled and executed diligently: allow for regular people to transition to electric without breaking the bank.

Authored by: Yves Helven