The Goods and Services Tax (GST) Council has announced its decision to retain the 5% GST rate on electric vehicles (EVs). This move ensures continued affordability for consumers while giving a strong push to India’s clean mobility mission. The decision is seen as a major step towards stabilizing the EV market, encouraging manufacturers, and supporting the country’s broader environmental goals.
Why This Decision Matters
Electric vehicles are steadily becoming a mainstream choice for Indian buyers. Retaining the concessional 5% GST rate means EVs remain more affordable compared to petrol and diesel-powered vehicles, which attract a much higher GST slab. By keeping EV prices competitive, the government is ensuring that adoption continues to rise, especially in the two-wheeler and small car segments.
For consumers, this provides price stability and confidence in shifting to green alternatives. For manufacturers and startups, it ensures policy clarity and long-term confidence to invest in scaling up operations, battery technologies, and charging infrastructure.
GST Rate Comparison: EVs vs Conventional Vehicles
| Vehicle Type | GST Rate | Additional Cess | Effective Tax Rate |
|---|---|---|---|
| Electric Vehicles (EVs) | 5% | Nil | 5% |
| Petrol/Diesel Cars (Small – <1200cc, <4m) | 28% | 1% | 29% |
| Petrol Cars (Medium – 1200-1500cc) | 28% | 3% | 31% |
| Diesel Cars (Medium – 1500cc) | 28% | 3% | 31% |
| Large Cars ( >1500cc, >4m length) | 28% | 17% | 45% |
| SUVs ( >1500cc, >4m, ground clearance ≥170mm) | 28% | 22% | 50% |
| Hybrids (Mild/Strong) | 28% | 15% | 43% |
| Two-Wheelers (Petrol/Diesel) | 28% | Nil | 28% |
| Auto-rickshaws (Petrol/Diesel) | 28% | Nil | 28% |
| Electric Two-Wheelers / Three-Wheelers | 5% | Nil | 5% |
This table highlights the massive tax advantage EVs enjoy, making them far more attractive in terms of upfront pricing compared to conventional vehicles.
Driving the Growth of Clean Mobility
India aims to achieve net zero emissions by 2070, and transport is one of the biggest contributors to carbon pollution. Retaining the 5% GST on EVs directly supports:
- Reduced vehicular emissions and cleaner air.
- Lower oil import dependency, saving foreign exchange.
- Boost to EV infrastructure, such as charging networks.
- Encouragement for startups and R&D investments in green technologies.
The GST Council’s decision to keep EVs under the 5% tax slab sends a clear message: India is committed to promoting sustainable transportation and accelerating EV adoption. With the combined push of government policy, consumer demand, and industry innovation, the future of mobility in India is set to become cleaner, greener, and more affordable.
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