NEW DELHI
India will retain its current tax structure for electric and hybrid vehicles for an extended period, the government's G20 Sherpa, Amitabh Kant, announced on Tuesday. Electric cars will continue to be taxed at a rate of 5%, while hybrid cars will face a significantly higher tax of 48%.
This decision comes amidst growing pressure from major car manufacturers like Maruti Suzuki India and Toyota Kirloskar Motor to lower the tax burden on hybrid cars. However, the government has reiterated its focus on promoting electric mobility and battery manufacturing in India.
"Our policy framework is to provide a significant tax advantage to electric vehicles compared to hybrid cars. This incentive is intended to encourage the adoption of electric vehicles and boost the development of the domestic EV ecosystem," Kant said during a panel discussion at Mercedes-Benz Sustainability Dialogue India 2024.
The government's stance aligns with its broader goal of achieving carbon neutrality by 2070. While some automakers argue that hybrid cars can play a crucial role in reducing emissions, others contend that a full commitment to electric vehicles is essential for achieving India's decarbonisation targets.
Hybrid cars in India are currently subject to an effective tax rate of around 48%, which includes the Goods and Services Tax (GST) and other applicable levies. Electric cars, on the other hand, benefit from a lower GST rate of 5%. While the government has considered proposals to reduce the GST rate on hybrid cars, it has ultimately decided to maintain the current tax structure.
Kant also highlighted the government's efforts to promote electric mobility through various initiatives, including the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme and the Production Linked Incentive (PLI) scheme. These schemes provide financial incentives to electric vehicle manufacturers and support the development of charging infrastructure across the country.
"We are committed to creating a conducive environment for the growth of the electric vehicle industry in India," Kant said. "By providing tax incentives, promoting charging infrastructure, and investing in renewable energy, we aim to accelerate the adoption of electric vehicles and reduce our carbon footprint."
The government's decision to maintain higher taxes on hybrid cars has sparked debate among automakers. While some support the government's focus on electric vehicles, others argue that hybrid cars can serve as a bridge to a fully electrified future. The ongoing discussions highlight the complex challenges and opportunities presented by India's transition to electric mobility.