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India rationalizes VAT for EVs to encourage adoption

Jingyue Hsiao, DIGITIMES, Taipei 0

Credit: DIGITIMES

Amid rapidly growing EV sales in recent years, India has decided to further lower the value-added tax on EV batteries to encourage EV adoption, which may benefit swappable EVs.

According to the Press Information Bureau of India, the Indian finance ministry announced that EVs, whether or not fitted with a battery pack, are eligible for the concessional GST (value-added tax for India) rate of 5%. Saur Energy reported that GST rates on EV battery packs would be reduced from 18% to 5%, accordingly.

The Economic Times quoted Akshit Bansal, CEO of EV charging network provider Statiq, saying that India has shown a clear intention to boost EV adoption, adding that he expects the industry to pass more cost benefits to the users and encourage people who are still looking for incentives to purchase EVs.

India has slashed EV and EV-related taxes in recent years. In 2018, India lowered the GST rate on EV batteries from 28% to 18%. In 2019, India reduced the rate for EVs from 12% to 5%, and the GST rate for EV chargers and charging stations were also reduced from 18% to 5%. Still, until the latest GST rationalization, swappable EVs without a battery pack had been levied a GST rate of 18% instead of 5%.

In February, the Indian finance ministry proposed an interoperable swapping battery policy. The official think-tank NITI Aayog has recommended lowering the GST rate for battery packs to encourage the development of swappable EVs.

According to Vahan Dashboard, India's EV registration fell sharply in May but rebounded in June. Business Standard reported that Hero Electric had seen a sharp fall in May because of a huge chip shortage, and Ola Electric's EV registration declined in June due to the impact of the supply chain constraints.

Despite sales drop from individual EV OEMs, India's overall EV sales keep increasing rapidly, with registrations reaching 329,366 and 429,875 units for 2021 and the first half of 2022, respectively. The EV share in total vehicle registrations has grown from 1.83% to 4.27% for the same period, Vahan Dashboard data shows.

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