The government in its second tenure has proposed a slew of incentives to promote the manufacturing and use of electric vehicles (EVs) in India, including income tax deductions aimed at making them cheaper for prospective buyers in the country.

 

“Considering our large consumer base, we aim to leapfrog and envision India as a global hub of manufacturing of electric vehicles,” said finance minister Nirmala Sitharaman in her maiden budget speech at Parliament Friday. The government plans to include solar storage batteries and charging infrastructure in a scheme the minister announced during her speech to invite global companies, through a ‘transparent’ competitive bidding process, to set up ‘mega-manufacturing’ plants in sunrise and advanced technology areas.

 

It has already also moved the Goods and Services Tax (GST) Council to lower the GST rate on electric vehicles to five per cent from 12 per cent earlier, Sitharaman added.

 

To make electric vehicle affordable to consumers, the government will provide an additional income tax deduction of Rs 1.5 lakh on the interest they pay on loans taken to purchase electric vehicles, she said.

 

“This amounts to a benefit of around Rs 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle,” stated Sitharaman. However, buyers are required to take these loans on or before March 31, 2023. To further incentivise e-mobility, the government is also exempting customs duty on certain parts of electric vehicles. This includes e-drive assemblies, on board chargers, e-compressors and charging guns.

 

According to the Society of Manufacturers of Electric Vehicles (SMEV), representing over 60 EV and EV component manufacturers, two-wheeler EVs currently cost anywhere between Rs 70,000 and Rs 1.10 lakh after subsidies under the second phase of the government’s Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) scheme. EV cars cost between Rs 7 lakh and Rs 10 lakh after this subsidy, it added. The GST reduction would further bring down the cost of such vehicles by 7 per cent, according to it.

 

“Provision of additional income tax deduction…on purchase of EVs would encourage customers to opt for EVs. Additionally, bringing down custom duty on lithium-ion cells to nil would further cut down the cost of batteries and help local battery manufacturers to scale up the business,” said Sohinder Gill, director general, SMEV.

 

 

According to him, the EV industry has witnessed 100 per cent growth in the 2018-2019 financial year.

 

The adoption rate of EVs in India has been ‘slow’ despite increasing demand for vehicles, stated the Economic Survey released Thursday.

 

Globally, sales of electric cars rose to over 10 lakh units sold in 2017 from just over 2,000 in 2008, with more than half the sales occurring in China, which had a 2 per cent market share of electric cars.

 

Compared to this, India’s market share was a ‘meagre’ 0.06 per cent, stated the survey, calling for a “policy push” to devise universal charging standards and provide adequate charging infrastructure.