The 36th Goods and Services Tax (GST) Council on Saturday unanimously decided to give an extra push to electric vehicles(EVs). The council approved the proposal to cut GST rates on electric vehicles from current 12 percent to 5 percent and has also brought down rates on chargers for electric vehicles from current 18 percent to 5 percent.

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“The initial proposal was to bring down the rates on EVs to 5 percent and chargers for EVs to 12 percent, but the council went a step ahead to keep both vehicles and chargers on the same rate, after detailed deliberations,” highly places sources, who were present in the GST Council on the condition of anonymity told CNBCTV18.

The new rates will be applicable from August 1, 2019, GST Council said.

The council also decided to exempt GST for local authorities on hiring of electric vehicles with a carrying capacity of more than 12.

Though, the decision is unanimous but sources, quoted earlier, shared that “states such as Punjab, West Bengal and Delhi did voice their concerns regarding revenue protection during the meeting.”

Confirming this, Manish Sisodia, deputy chief minister and finance minister of Delhi in an interview to CNBCTV18 said that “On behalf of Delhi I did put forward the concerns on revenues loss but Delhi is in favour of the decision (to cut rates on EVs). Rather, West Bengal finance minister Amit Mitra suggested the council to take a relook at the rate structure for BS 6 vehicles, citing that not everyone opts for electric vehicles and BS6 is the future of diesel and petrol vehicles, also BS6 vehicles will help in reducing pollution and traffic situation across the nation, thus making a case for the council to consider the proposal. The council might consider it later.”

However, when CNBCTV18 asked government officials, whether the council will consider the proposal mooted by West Bengal, officials said that the council at this stage is “not looking at any new proposal of a rate cut on the auto industry.”

“There was a proposal suggested by West Bengal but if the council decides to reduce rates on BSVI vehicles or automobiles then it would lead to a huge revenue loss for both centre and states,” government officials said.

“Rather, the council has assured states that their suggestions and concerns have been recorded and will be addressed at an appropriate time,” government officials added.

Meanwhile, the council also gave relief to composition taxpayers and extended the deadline for filing of returns from July 31 to August 31. The council also extended the deadline for service taxpayers who wish to volunteer for composition scheme from July 31 to Sept 30.

Hailing the decision of the GST Council to cut rates on EVs, Abhishek Jain, Tax Partner at EY India, said, "The reduced rate of GST on EVs should help foster demand for this environment friendly variant; through a tax arbitrage between conventional vehicles and EVs. Separately, for a holistic outlook to this leitmotif, reduction in rate for infrastructure of these cars, should provide further inducement to this sector."

"It's a major decision towards pollution free transport in our cities. I welcome this decision of GST Council. It will go a long way in promoting Electric Vehicles in India," said RK Singh, Power Minister.

Expressing similar sentiments, Ranjeet Mahtani, partner, Dhruva Advisors LLP said," This rate rationalisation could prove the turbo boost for the EV sector; while the traditional automobile sector looks for it's starter. The recommendation necessitates a scrutiny of the inverted duty position for EVs and, at a policy level it would be ideal the GST Council had also cut GST rate on key parts and components used for manufacture of EVs."

"The reduction of tax rates on electric vehicles and chargers is a welcome addition to the slew of incentives given to the EV industry in this year’s Budget. The Government appears to be committed to its goals of clean India by promoting alternatives to fuel-based automobiles as well as public transportation. It is hoped that the rate reduction would also provide the necessary motivation for increasing the manufacturing base in India," said Mekhla Anand, partner, Cyril Amarchand Mangaldas.

First Published:Jul 27, 2019 4:38 PM IST