&imwidth=800&imheight=600&format=webp&quality=medium "GST Council meets today: Will electric cars become more expensive?")
The Goods and Services Tax Council, which decides on matters related to GST, has reportedly backed raising taxes on electric cars. The panel has reportedly proposed increasing the GST on electric cars ($23,000-$46,000) from 5 per cent to 18 per cent. If approved, the prices of these cars will likely go up.
What is the Centre's proposal on GST on electric vehicles?
The central government was also mulling over taxing cars priced over $46,000 at 28 per cent, as it believesthat such vehicles are imported and are meant for the upper segment of society, reported Reuters. However, since the government has proposed to eliminate the 28 per cent tax slab, such cars will likely be placed in the 18 per cent slab.
The GST Council met todayto deliberateon the implications of the government's proposal on GST.
The Centre intends to eliminate the 28 per cent and 12 per cent GST slabs and place items in these categories in 18 per cent and 5 per cent slabs, respectively.
The Group of Ministers has already approved the decision. If ratified by the GST Council, the move will ease the tax burden on consumers and increase spending.
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India's EV market is small, accounting for only 5 per cent of the total cars sold between April and July. However, it clocked a 93 per cent growth during that period, hinting at high potential.
A document accessed by the news agency noted that the 5 per cent tax was to incentivise faster adoption of electric vehicles. It, however, pointed out that such vehicles can be taxed at higher rates.
If approved, this move will affect foreign automakers more than the domestic EV manufacturers.
This might target foreign manufacturerslike Mercedes-Benz, BMW, and BYD. Tesla, which recently launched its Model Y in India, will fall into this category.
Carmakers, however, have called for keeping the GST rate on EVs the same.
Mercedes-Benz told the agency that its top-end cars won't be impacted much. However, entry-level EVs would be mostly impacted.
Tata Motors leads the Indian electric car market with a whopping 40 per cent market share. Mahindra's market share is 18 per cent, followed by BYD at 3 per cent. Mercedes and BMW's combined market share is 2 per cent.