India has seen rapid growth in its electric vehicle numbers due to several intervening reasons. Both the central and regional governments have implemented incentive programs that have propelled the country forward in the EV revolution. However, the Indian government has made another tumultuous decision to reduce the GST of battery packs from 18% to a flat 5%. This means that 13 percentage points have been slashed from the GST for cars whether they are fitted with a battery or not.
The move by the Indian government to give this huge concession on GST is meant to further stimulate the production and demand of EVs in the subcontinent. The statement from India’s Finance Ministry noted that the decision on the GST rate cut was taken by the GST Council last month. EV manufacturers and by extension, Indian consumers are direct beneficiaries of the slash in EV batteries taxes. The battery pack of an electric vehicle accounts for up to 50% of its cost.
This is the second time the Indian government is slashing the GST rate in four years. In 2018, it was slashed from 28% to 18%. This provided additional incentives for EV manufacturers to set up shops in India. The Indian subcontinent has seen a surge in manufacturing and sales of EVs in the last two years. This move will further stimulate the market for the delivery of renewable energy vehicles and lower carbon footprint. The trickle-down benefits of this move could enhance capacity and demand across the EV ecosystem in India.
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