GST On Electric Vehicles May Be Reduced To 5 Per Cent

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  • The GST Council is set to take up the proposal of relaxing GST on electric vehicles at its June 20 meeting
  • Punjab has sought new rates for automobiles, textiles, micro, small and medium enterprises (MSMEs)
  • The automobile sector has sought urgent measures to boost demand, after recording the steepest decline in sales in 18 years

India may cut the goods and services tax (GST) on electric vehicles to 5 per cent from 12 per cent to provide a stimulus to the sector that’s a high priority for the Narendra Modi government.

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The GST Council is set to take up the proposal at its June 20 meeting, said a senior government official aware of the development to Economic Times.

Punjab took the driver’s seat
This comes as Punjab has written to the Centre seeking a review of tax rates. The state has sought new rates for automobiles, textiles, micro, small and medium enterprises (MSMEs) to provide a boost to the economy, which has slowed to the lowest in five years in FY19. 

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Punjab finance minister Manpreet Badal has suggested to the union finance minister and GST Council chairman Nirmala Sitharaman that tax rates for these sectors need to be lowered to address the slowdown. 

The automobile sector has sought urgent measures to boost demand, after recording the steepest decline in sales in 18 years. Passenger vehicle sales have been sliding and fell by 21 per cent in May, prompting the closure of dealerships and plant shutdowns. 

Eye on electric vehicles 
Policymakers favour incentivising electric vehicles in line with the government’s long-term strategy. The Niti Aayog has prepared a roadmap that envisages all vehicles sold after 2030 being electric. The roadmap lays down that all two-and three-wheelers should go electric from 2023 and all commercial vehicles from 2026. 

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