If you have been considering buying an electric car or bike, well, India's Union Budget 2019, just made it slightly easier to acquire one. The Union Budget 2019, however, didn't offer much respite to the auto industry, besides encouraging manufacture and purchase of electric vehicles.
In addition to the FAME II scheme, where there’s a Rs 10,000 crore subsidy being offered to manufacturers of electric vehicles, the government has now made it easier to pick up electric vehicles by offering more incentives to buyers.
Here’s a look at what’s on offer.
GST Reduced on Electric Vehicles
Finance minister Nirmala Sitharaman in her budget speech has proposed to reduce the rate of GST on electric vehicles from 12.5 percent to 5 percent, which should bring down the prices of electric vehicles further. Petrol and diesel cars continue to be taxed at rates going from 18 percent to 28 percent.
Government has already moved GST Council to lower GST on EVs from 12 percent to 5 percent and the additional income tax reduction is a major boost for end consumers to purchase EVs. It addresses the concern of the upfront cost of purchasing electric vehicles.Tarun Mehta, CEO, Cofounder, Ather Energy
Tax Exemption on EV Loans
The government is looking to make India a hub for manufacturing of electric vehicles including solar storage batteries as well. To encourage purchasing of electric vehicles, the government has proposed a Rs 1.5 lakh additional income tax deduction per year on interest paid on the loan for an electric vehicle.
This means an individual can save up to Rs 2.5 lakh rupees over the loan tenure of five years on an electric vehicle loan, either for cars or two-wheelers. For salaried persons, this is an additional tax-saving measure.
The additional income tax deduction of Rs 1.5 lakh on the interest paid on loans to purchase EVs will boost consumer confidence leading to higher adoption. We echo the government’s vision to make India a hub for EV manufacturing.Goldie Srivastava, Co-Founder and CEO, SmartE
Customs Duty Exemption on Electric Vehicles
The budget looks to encourage the manufacturing of local electric vehicles. Customs duty is being exempted on electric vehicle components to encourage local manufacturing. On the other hand, customs duty exemption has been removed on some auto parts, which may make regular cars and bikes more expensive.
The government wants to set up mega manufacturing plants such as semi-conductor fabrication, solar photo-voltaic cells, lithium batteries, computer servers, laptops etc. All these will get exemption under 35AD of the Income Tax Act. This act extends investment linked incentives to taxpayers with respect to capital expenditure.
Relief from angel tax is also a big thumbs up and relief for startups. However, better structuring is required for deployment of Fund of Funds to ensure benefit to high technology intensive startups which fall in the category of high risk, high reward.Akshay Singhal, Founder, Log9 Materials.
Besides the focus on electric vehicles and encouraging local manufacturing for EV components, the auto industry hasn’t got much respite.
The government has proposed an increase of Rs 1 per litre on petrol and diesel for Special Additional Duty and Rs 1 per litre on petrol and diesel on Infrastructure Cess to mop up the subsidy it is offering on the other hand to electric vehicle manufacturing and purchase. This is to promote e-Mobility in India.
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